GLOSSARY VOCAB Flashcards
(677 cards)
1
Q
100-year flood plain
A
An area where a flood has a 1%
chance of being equaled or exceeded each year. Thus, a
100-year flood could occur more than once in a relatively
short period of time or even within the same month.
2
Q
ad valorem tax
A
A tax levied according to value,
generally used to refer to real estate tax.
(Ad valorem means “according to value”)
(Assed Value / 100) x Tax Rate = Annual Taxes
3
Q
abstract of title
A
The condensed history of a title to
a particular parcel of real estate, consisting of a summary
of the original grant and all subsequent conveyances and
encumbrances affecting the property and a certification by
the “abstractor” that the history is complete and accurate. If the title is clean an “certificate of title” is issued validifying that this is the sellers property to sell
4
Q
adverse possession
A
The open, continuous, exclusive,
adverse, notorious (OCEAN) possession of another’s land
under a claim of title. Possession for a statutory period of
20 years in North Carolina may be a means of acquiring
title.
*Open
- Must be operating their use out in the open not surreptitiously or in stealth
*Continuous
- Without interruption for up to 20 years
*Exclusive
- Must use the land exclusively meaning by themselves not open to the public; making an ordinary use of is the type of possession
*Adverse
- I couldn’t really find a good definition for it yet but it almost means that it has to be a kind of hostile situation between owner and squatter; or against the owners rights or desires
*Notorious
- the lengths someone would go to to accomplish all of this could be described as hostile and notorious
5
Q
acceleration clause
A
The clause in a mortgage or deed
of trust that can be enforced to make the entire debt due
immediately if the borrower defaults on an installment
payment or another covenant.
6
Q
aesthetic zoning
A
Zoning ordinances that regulate the
appearance of real property, such as exterior color, exterior
construction material, required screening and fencing.
7
Q
acceptance
A
Expression of intent by the offeree to be
bound by the terms of the offer; must be in writing if the
contract pertains to real property. Acceptance must be
communicated to the opposite party to create a contract.
8
Q
after-tax cash flow
A
The amount of cash remaining
after the owner has reported all income from the property,
less appropriate tax deductions and any taxes due.
9
Q
age-life method
A
A method of depreciation computed
by dividing the replacement cost of a property by the
number of years of remaining useful life; also called the
straight-line method.
10
Q
accession
A
Acquiring title to additions or
improvements to real property as a result of the
annexation of fixtures or the accretion of alluvial deposits
along the banks of streams.
11
Q
agency
A
The relationship between a principal and an
agent wherein the agent is authorized to represent the
principal in certain transactions.
12
Q
accretion
A
The increase or addition of land by the
deposit of sand or soil washed up naturally from a river,
lake, or sea.
13
Q
agent
A
One who acts or has the power to act for
another. A fiduciary relationship is created under the
law of agency when a property owner, as the principal,
executes a listing agreement or management contract
authorizing a licensed real estate broker to be the property
owner’s agent. See OLD CAR.
14
Q
acre
A
A measure of land equal to 43,560 square feet,
4,840 square yards, 4,047 square meters, 160 square rods,
or 0.4047 hectare.
15
Q
agricultural fixture
A
In North Carolina, a fixture
attached to leased property by a tenant farmer is
considered the landowner’s real property rather than the
tenant’s personal property.
16
Q
action to quiet title
A
A lawsuit brought in a court in
order to establish a party’s title to real property and to
“quiet” any challenges or claims to the title.
17
Q
air rights
A
The right to use the open space above a
property, usually allowing the surface to be used for
another purpose.
18
Q
actual eviction
A
The legal process that results in
the tenant’s being physically removed from the leased
premises; summary ejectment.
19
Q
alienation
A
The act of transferring property to another.
Alienation may be voluntary, such as by gift or sale,
or involuntary, as through eminent domain or adverse
possession.
20
Q
addendum
A
A rider to a contract with additional terms
or conditions.
21
Q
alienation clause
A
This clause prevents the borrower
from letting someone else assume the debt without the
lender’s approval. See due-on-sale clause.
22
Q
adjustable rate mortgage (ARM)
A
A loan
characterized by a fluctuating interest rate, usually one
tied to a published index. Caps for adjustments on
periodic interest, lifetime interest, and payment amounts
are normal.
23
Q
amendment
A
A change to contractual terms or
conditions.
24
Q
Americans with Disabilities Act (ADA)
A
Federal act
implementing regulations that protect citizens with mental
or physical disabilities. Does not apply to residential
housing but to commercial facilities and places of public
accommodation.
25
American Land Title Association (ALTA) policy
A title insurance policy that protects the interest in a
collateral property of a mortgage lender that originates a
new real estate loan.
26
amortized loan
A loan in which principal as well as
interest is payable in periodic installments over the term of
the loan.
27
amount realized
A calculation performed to determine
capital gain; the difference between the actual sales price
and expenses of the sale.
28
annexation
The process of converting personal property
into real property.
29
annual percentage rate (APR)
The relationship of
the total finance charges associated with a loan. This must
be disclosed to borrowers by lenders under the Truth in
Lending Act.
30
anticipated revenue
A synonym for potential or
projected or scheduled gross income used when developing
an operating statement.
31
anticipation
The appraisal principle that value can
increase or decrease based on the expectation of some future
benefit or detriment affecting the property.
32
antitrust laws
Laws designed to preserve the free
enterprise of the open marketplace by making illegal
certain private conspiracies and combinations formed to
minimize competition. Most violations of antitrust laws in
the real estate business involve either price fixing (brokers
conspiring to set fixed compensation rates) or allocation of
customers or markets (brokers agreeing to limit their areas
of trade or dealing to certain areas or properties).
33
apparent authority
When someone claims to be an
agent but there is no express agreement, the principal can
establish an agency relationship by performing any act
that accepts (ratifies) the conduct of the agent as that of an
agent.
34
appraisal
An estimate of the quantity, quality, or value
of something. The process through which conclusions of
property value are obtained; also refers to the report that
sets forth the process of estimation and conclusion of value.
35
appreciation
An increase in the worth or value of a
property due to economic or related causes, which may
prove to be either temporary or permanent; opposite of
depreciation.
36
appurtenance
A right, a privilege, or an improvement
belonging to, and passing with, the land.
37
arm’s-length transaction
A transaction where the
parties are dealing from equal bargaining positions.
38
asbestos
A fire-resistant mineral fiber used in a wide
variety of building supplies prior to 1978; environmental
health hazard, when friable, that can cause respiratory
diseases and cancer.
39
assessment
(1) The imposition of a tax, charge, or levy,
usually according to established rates. (2) Official valuation
of property for the purpose of establishing assessed value for
tax purposes.
40
as is
A description of the physical condition of the
property where no promises are made regarding its quality
or condition.
41
assignment
The transfer to another party in writing of
rights or interest in a bond, a mortgage, a lease, or another
instrument.
42
assumption of mortgage
Acquiring title to property
on which there is an existing mortgage and agreeing to
be personally liable for the terms and conditions of the
mortgage, including payments.
43
auction
A form of selling property where oral bids are
taken and the property is sold to the highest bidder.
44
avulsion
The sudden tearing away of land, as by
earthquake, flood, volcanic action, or the sudden change in
the course of a stream. The loss of land may not result in
loss of title to the property.
45
backup offer
An offer submitted to the property owner
with knowledge that the owner is already under contract; a
secondary offer.
46
balloon payment
A final payment of a mortgage loan
that is larger than the required periodic payments because
the loan amount was not fully amortized.
47
bargain and sale deed
A deed that carries with it
no warranties against liens or other encumbrances but
that does imply that the grantor has the right to convey
title. The grantor may add warranties to the deed at his
discretion.
48
baseboard
A board around the bottom of a wall
perpendicular to the floor. Sometimes called wains,
baseboards cover the gap between the floor and the wall,
protecting the wall from scuffs and providing a decorative
accent.
49
Base Flood Elevation
The location of the lowest floor
in relation to the computed elevation to which floodwater
is anticipated to rise during a flood on the flood map.
50
base line
The main imaginary line running east and
west and crossing a principal meridian at a definite point;
used by surveyors for reference in locating and describing
land under the rectangular (government) survey system of
legal description.
51
basement
Story-high space below the first floor that is
totally or partially below the exterior grade; floor is usually
concrete slab.
52
basis
The financial interest that the IRS attributes to
an owner of an investment property for the purpose of
determining annual depreciation and gain or loss on the
sale of the asset. If a property was acquired by purchase,
the owner’s basis is the cost of the property plus allowable
closing costs plus the value of any capital expenditures for
improvements to the property, minus any depreciation
allowable or actually taken. This new basis is called the
adjusted basis.
53
before-tax cash flow
The money left after debt service
has been subtracted from the net operating income and
before income tax is paid; also called cash throw-off or cash
flow after debt service.
54
benchmarks
Permanent reference marks or points
established for use by surveyors in measuring differences in
elevation.
55
beneficiary
(1) The person for whom a trust operates
or in whose behalf the income from a trust estate is drawn.
(2) A lender in a deed of trust loan transaction. (3) The
recipient of personal property (a bequest or legacy) in a will.
56
blanket loan
A mortgage covering more than one parcel
of real estate, providing for each parcel’s partial release from
the mortgage lien upon repayment of a definite portion of
the debt.
57
blockbusting
The illegal practice of inducing
homeowners to sell their properties by making
representations regarding the entry or prospective
entry of persons of a particular protected class into the
neighborhood.
58
blue-sky laws
Common name for state and federal
laws that regulate the registration and sale of investment
securities.
59
boot
Money or property given to make up any difference
in value or equity between two properties in a 1031
exchange.
60
branch office
A secondary place of business apart from
the principal or main office from which real estate business
is conducted. A branch office usually must be run by a
broker-in-charge working on behalf of the broker.
61
breach of contract
The violation of any terms or
conditions in a contract without legal excuse; for example,
failure to make a payment when it is due.
62
bridge loan
A short-term loan to cover period between
termination of one loan and the beginning of another
loan; between interim construction loan and a permanent
takeout loan; residential financing arrangement where
homeowner borrows money under a second mortgage on
buyer’s unsold current home to fund acquisition of a new
home.
63
British Thermal Unit (BTU)
A measure of heat used in
rating the capacity of heating and cooling systems.
64
broad form (HO-2)
An insurance policy covering
buildings and personal property against loss or damage
from fire, lightning, removal, windstorm, hail, explosion,
riot, smoke, vandalism, and theft. This form also covers
falling objects; weight of snow, ice, or sleet; collapse of
buildings; malfunctioning heating systems; accidental
discharge of water or steam; and electrical currents that are
artificially generated.
65
broker
(1) One who acts as an intermediary on behalf of
others for a fee or commission. (2) One who is licensed to
list, lease, buy, exchange, auction, negotiate or sell interest
in real estate for others for a fee.
66
brokerage
The bringing together of buyers and sellers in
the marketplace.
67
broker-in-charge (BIC)
Required for each brokerage
firm and each branch office, the full broker responsible
for displaying all licenses properly, notifying the North
Carolina Real Estate Commission of any change of business
address or trade name, ensuring that all advertising and
agency compliance is done properly, maintaining the trust
account and trust account records properly, retaining and
maintaining all real estate transaction records properly, and
supervising all provisional brokers associated with the firm
or office.
68
budget comparison statement
Compares actual
results with the original budget, often giving either
percentages or a numerical variance of actual versus
projected income and expenses.
69
buffer zone
A strip of land, usually used as a park or
designated for a similar use, separating and screening land
dedicated to one use from land dedicated to another use
(e.g., residential from commercial).
70
building code
An ordinance that specifies minimum
standards of construction for buildings to protect public
safety and health.
71
building permit
Written governmental permission
for the construction, alteration, or demolition of an
improvement, showing compliance with building codes and
zoning ordinances. See certificate of occupancy
72
bundle of legal rights
The concept of land ownership
that includes ownership of all legal rights to the land (i.e.
disposition, exclusion, enjoyment, possession and control).
73
business cycle
The upward and downward fluctuations
in business activities generally characterized by four stages:
expansion, recession, depression, and revival.
74
buydown
A financing technique used to reduce the
monthly payments for the first few years of a loan. Funds in
the form of discount points are given to the lender to buy
down or lower the effective interest rate paid by the buyer,
thus reducing the monthly payments for a set time.
75
buyer agency agreement
A principal-agent
relationship in which the broker is the agent for the buyer,
with fiduciary responsibilities to the buyer. The broker
represents the buyer under the law of agency.
76
Buyer Closing Disclosure (BCD)
A form required (as
of 2015) in most residential mortgage transactions provided
to a buyer prior to closing that includes details about
settlement costs, such as loan and closing costs.
77
call
In surveying, a reference to a course, distance, or
monument when a describing a boundary.
78
capital gain
The taxable profit earned from the sale of a
capital asset such as real property. Profits from assets owned
for 12 months or less are treated as short-term capital gain,
which is taxable as ordinary income. Profits from assets
owned longer than 12 months are treated as long-term
capital gain that is usually taxed at a much lower rate than
ordinary income.
79
capital improvement
The addition of a permanent
structural improvement or the restoration of some aspect
of a property that will either enhance the property’s
overall value or increases its useful life; often used in the
calculation of capital gain.
80
capital loss
A loss derived from the sale of a capital asset
such as real property that may be deductible from ordinary
taxable income.
81
capitalization
A mathematical process for estimating
the value of a property using a proper rate of return on the
investment and the annual net operating income expected
to be produced by the property. The formula is Income ÷
Rate = Value.
82
capitalization rate
The rate of return a property will
produce on the owner’s investment.
83
carbon monoxide
A colorless, odorless gas produced as
a byproduct of inefficient burning of fuel such as gas, oil or
wood; poor ventilation can lead to deadly concentration of
gas.
84
cash flow
The net spendable income from an
investment, determined by deducting all operating and
fixed expenses from the gross income. When expenses
exceed income, a negative cash flow results.
85
cash-on-cash rate of return
Derived by dividing the
before-tax cash flow by the owner’s cash investment; equity
dividend rate.
86
caveat emptor
A Latin phrase meaning “Let the buyer
beware.” In a caveat emptor state, sellers do not have to
disclose any facts about their property when selling.
87
ceiling joist
Attached to the top plate of a wall, these
joists carry the weight of the roof.
88
certificate of occupancy (CO)
A certificate issued by
a government authority stating that a building is fit for
occupancy and there are no building code violations; the
end result of a successful building permit.
89
certificate of reasonable value (CRV)
A form
indicating the appraised value of a property being financed
with a VA loan.
90
certificate of title
A statement of attorney’s opinion on
the status of the title to a parcel of real property based on a
title search of specified public records.
91
chain of title
The succession of title conveyances, from
some accepted starting point, whereby the present holder of
real property derives title.
92
change
The appraisal principle that no physical or
economic condition remains constant.
93
Civil Rights Act of 1866
A federal act that prohibits
racial discrimination in the sale and rental of all real and
personal property.
94
closing
The consummation of a real estate transaction;
seller delivers clear title and buyer delivers payment of the
purchase price; occurs at the recordation of the deed per the
standard residential sales contract.
95
closing agent
A third party that conducts the closing of
the transaction, usually an attorney in North Carolina.
96
Closing Disclosure (CD)
A settlement form required in
most residential mortgage loans required by the TRID rules
since October 2015.
97
closing statement
A detailed cash accounting of a real
estate transaction showing all cash received, all charges and
credits made, and all cash paid out in the transaction.
98
cloud on the title
Any document, claim, unreleased
lien, or encumbrance that may impair the title to real
property or make the title doubtful; usually revealed by a
title search and removed by either a quitclaim deed or suit
to quiet title.
99
clustering
The grouping of homesites within a
subdivision on smaller lots than normal, with the remaining
land used as common area.
100
cluster zoning
The practice of slightly reducing the sizes
of the individual lots and clustering the lots around varying
street plans such as cul-de-sacs to create more open space in
a development.
101
co-brokered sale
A real estate transaction involving
two or more brokerage firms, one firm representing the
seller and the other representing the buyer.
102
code of ethics
A written system of standards for ethical
conduct.
103
codicil
A supplement or an addition to a will, executed
with the same formalities as a will, that normally does not
revoke the entire will.
104
coinsurance clause
A clause in insurance policies
covering real property that requires that the policyholder
maintain fire insurance coverage generally equal to at least
80% of the property’s actual replacement cost.
105
co-listing
Two brokerage firms team up to sell a
property, usually to create more effective marketing for the
listing client.
106
commingling
The illegal act by a real estate broker
of placing consumer funds with personal funds. By law,
brokers are required to maintain a separate trust or escrow
account for other parties’ funds held temporarily by the
broker.
107
commission
Payment to a broker for services rendered,
as in the sale or purchase of real property; traditionally, a
percentage of the gross sales price of the property but can
be a flat fee or some other calculation.
108
common elements
Parts of a prop common use by
all of the condominium residents. Each condominium
owner has an undivided ownership interest in the common
elements.
109
common interest community ownership (or hybrid)
ownership
Ownership that contains elements of both
ownership in severalty and concurrent ownership.
110
common law
The body of law based on custom, usage,
and court decisions.
111
common law of agency
The basic framework of law
that governs the legal responsibilities of the broker to the
people the broker represents.
112
comparable
Property used in an appraisal report that is
substantially equivalent to the subject property.
113
comparative market analysis (CMA)
A comparison of
the prices of recently sold homes that are similar to a listing
seller’s home in terms of location, style, and amenities; an
estimate of market value; also called a broker price opinion.
114
compensatory damages
Money damages awarded
to the injured party to compensate them for the breach of
contract but not to punish the breaching party.
115
competition
The appraisal principle that states that
excess profits generate competition.
116
Comprehensive Loss Underwriting Exchange
(C.L.U.E.)
A report which generally contains up to seven
years of personal auto and property data, used by insurance
companies to determine the insurability of a property and/
or auto owner.
117
concurrent ownership
Ownership involving two or
more owners.
118
condemnation
A judicial or an administrative
proceeding to exercise the power of eminent domain,
through which a government agency takes private property
for public use and justly compensates the owner.
119
condition
It limits coverage of a specified property in an
insurance policy.
120
conditional-use permit
Written governmental
permission allowing a use inconsistent with zoning but in
the public interest, such as locating an emergency medical
facility in a predominantly residential area: special-use
permit.
121
condition subsequent
A defeasible fee simple estate
that dictates some action or activity that the new owner
must not perform. The former owner retains a right of
reentry, so if the condition is broken, the former owner can
take repossession of the property.
122
condominium ownership
The absolute ownership of
a unit in a multiunit building based on a legal description
of the airspace the unit actually occupies, plus an undivided
interest in the ownership of the common elements, which
are owned jointly with the other condominium unit
owners.
123
conforming loan
A standardized conventional loan
that meets Fannie Mae’s or Freddie Mac’s purchase
requirements.
124
conformity
The appraisal principle that holds that the
greater the similarity among properties in an area, the better
they will hold their value.
125
Connor Act
A North Carolina law that requires many
types of real estate documents to be recorded for protection
against claims from third parties. These documents include
deeds, mortgages, purchase contracts, installment land
contracts, assignments, options, leases exceeding three years,
easements, and restrictive covenants; a pure race statute.
126
consequential damages
Award of special damages
if the breaching party entered the contract with plans to
breach; injured party may sue for lost profits.
127
consideration
(1) That received by the grantor in
exchange for a deed. (2) Something of value that induces a
person to enter into a legally enforceable contract.
128
constructive eviction
The actions of a landlord that
so materially disturb or impair a tenant’s enjoyment of the
leased premises that the tenant is effectively forced to move
out and terminate the lease without liability for any further
rent.
129
constructive notice
The notice given to the world
by recorded documents. All people are charged with
knowledge of such documents and their contents, whether
or not they have actually examined them. Possession of
property is also considered constructive notice that the
person in possession has an interest in the property
130
Consumer Financial Protection Bureau (CFPB)
A federal agency created by the Dodd-Frank Act in 2010 to
oversee consumer protection via financial regulations within
seven federal agencies.
131
contingency
A provision in a contract that requires a
certain act to be done or a certain event to occur before the
contract becomes binding; a condition of the contract.
132
contract
A legally enforceable promise or set of promises
between legally competent parties that must be performed
for consideration. If a breach of the promise occurs, the
law provides a remedy. A contract may be either unilateral,
by which only one party is bound to act, or bilateral, by
which all parties to the instrument are legally bound to act
as prescribed.
133
conventional loan
A loan from private investors that
requires no government insurance or guarantee.
134
conveyance
A term used to refer to any document
that transfers title to real property. The term is also used in
describing the act of transferring.
135
cooperative listing service (CLS)
Another term for
MLS. See Multiple Listing Service.
136
cooperative ownership
A residential multiunit
building whose title is held by a trust or corporation that
is owned by and operated for the benefit of persons living
within the building, who are the beneficial owners of the
trust or stockholders of the corporation, each possessing a
proprietary lease to a specific apartment in the building.
137
co-ownership
Title ownership held by two or more
persons or entities.
138
corporation
An entity or organization, created by
operation of law, whose rights of doing business are
essentially the same as those of an individual. The entity has
continuous existence until it is dissolved according to legal
procedures.
139
cost approach
The process of estimating the value
of a property by adding the appraiser’s estimate of the
reproduction or replacement cost of the building, less
depreciation to the estimated land value.
140
cost recovery
An Internal Revenue Service term for
depreciation.
141
counteroffer
A new offer made in response to an offer
received. It has the effect of rejecting the original offer.
142
covenant
A written agreement between two or more
parties in which a party or parties pledge to perform or
not perform specified acts with regard to property; usually
found in such real estate documents as deeds, mortgages,
leases, and contracts for deed.
143
covenant of quiet enjoyment
The covenant implied
by law by which a landlord guarantees that a tenant may
take possession of leased premises and that the landlord
will not interfere in the tenant’s possession or use of the
property.
144
crawl space
The space between the ground surface
and the first floor; frequently found in houses without
basements that are not built on a slab foundation.
145
credit
On a closing statement, an amount entered in a
person’s favor—an amount the party has paid or an amount
received from another party.
146
customer
A third party to whom is owed honesty and
fairness; not a fiduciary relationship.
147
datum
A horizontal plane from which heights and
depths are measured.
148
debit
On a closing statement, an amount charged; an
amount the party must pay at settlement.
149
debt service
The principle and interest payment on a
loan.
150
decedent
A person who has died
151
declaration of restrictive covenants
A statement of
all covenant, conditions and restrictions (CC&Rs) affecting
a parcel of land; sometimes noted on the plat map or in a
separate document. Restrictions are appurtenant and aim to
protect property values.
152
dedication
The voluntary transfer of private property
by its owner to the public for some public use, such as for
streets or schools.
153
deductible
Loss not covered by the insurer
154
deed
A written instrument that, when executed and
delivered, conveys title to or interest in real estate; evidence
of title.
155
deed in lieu of foreclosure
A deed given by the
mortgagor to the mortgagee when the mortgagor is in
default under the terms of the mortgage. This avoids
foreclosure but does not remove liens from the property;
“friendly foreclosure.”
156
deed of trust
An instrument used to create a mortgage
lien by which the borrower conveys title to a trustee, who
holds it as security for the benefit of the note holder (the
lender); also called a trust deed.
157
deed restriction
Clause placed in a deed by the owner
to control the future uses of the property. See restrictive
covenants.
158
default
The nonperformance of a duty, whether arising
under a contract or otherwise; failure to meet an obligation
when due.
159
defeasance clause
A clause used in leases and
mortgages that cancels a specified right upon the occurrence
of a certain condition, such as cancellation of a mortgage
upon repayment of the mortgage loan.
160
defeasible fee estate
An estate in which the holder
has a fee simple title that may be terminated upon
the occurrence or nonoccurrence of a specified event.
Two categories of defeasible fee estates exist: fee simple
determinable and fee simple on condition subsequent.
161
deferred maintenance
The act of postponing
necessary maintenance and repairs on rental properties
162
deficiency judgment
A personal judgment levied
against the borrower when a foreclosure sale does not
produce sufficient funds to pay the mortgage debt in full; a
general lien.
163
delivery and acceptance
The actual delivery of a deed
by a grantor and the actual or implied acceptance of the
deed by the grantee; recordation of the deed is viewed as
acceptance.
164
demand
The amount of goods people are willing and
able to buy at a given price; often coupled with supply.
165
Department of Housing and Urban Development
(HUD)
A federal cabinet department active in national
housing programs. Among its many programs are urban
renewal, public housing, model cities, rehabilitation loans,
FHA subsidies, fair housing enforcement, and water and
sewer grants.
166
depreciation
(1) In appraisal, a loss of value in
property due to any cause, including physical deterioration,
functional obsolescence, and external obsolescence. (2) In
real estate investment, an expense deduction for tax
purposes taken over the period of ownership of income
property
167
descent
The acquisition of an estate by inheritance
in which an heir succeeds to the property by intestate
succession.
168
designated dual agency
An agency option under dual
agency that allows the firm, with both clients’ permission,
to appoint one or more licensees to exclusively represent
the seller-client and one or more licensees to exclusively
represent the buyer-client; also called designated agency.
169
developer
A person or company that attempts to
put land to its most profitable use through the construction
of improvements.
170
devise
A gift of real property by will. The donor is the
devisor, and the recipient is the devisee.
171
direct reduction loan
A mortgage loan that requires
a fixed amount of principal payment in each period; the
total debt service payment starts higher than with a level
payment loan since interest portion will reduce with each
payment.
172
discount point
Interest paid in advance; one point
equals 1% of the loan amount for the borrower and
increases the yield for the investor approximately 1
⁄8%.
173
Doctrine of Prior Appropriation
Followed primarily
by Western states, this doctrine contends that water rights
are determined by priority of beneficial use. The first person
to use water or divert water for a beneficial use or purpose
can acquire individual rights to the water. In these states,
property owners may have land that borders water but no
rights to use that water.
174
Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank)
Legislation passed in
2010, primarily affecting financial institutions and their
consumers in an effort to prevent a recurrence of events that
caused the economic recession and the mortgage market
meltdown during the mid-2000s.
175
dominant tenement
A property that includes in its
ownership the appurtenant right to use an easement over
another person’s adjacent property (called the servient
tenement) for a specific purpose; ownership of the easement
runs with the land.
176
dormer
A projection built out from the slope of a roof,
used to house windows on the upper floor and to provide
additional headroom. Common types of dormers are the
gable dormer and the shed dormer.
177
dual agency
Representing both parties to a transaction;
must be consensual and reduced to writing prior to
presentation of first offer.
178
due diligence
(1) a buyer’s investigative process of
having experts inspect the property, examine title, and
review any leases to determine if the property meets the
buyer’s needs and if buyer wishes to proceed with the
purchase. During the “due diligence period,” the buyer
can terminate the purchase contract for any reason or no
reason; (2) a licensee’s affirmative duty to discover and
disclose any material facts about the property in question.
179
due-on-sale clause
A provision in a mortgage that
states that the entire balance of the note is immediately due
and payable if the mortgagor transfers (sells) the property.
See alienation clause.
180
duress
The unlawful constraint or action exercised on
a person whereby the person is forced to perform an act
against that person’s will. A contract entered into under
duress is voidable.
181
earnest money
Money deposited by a buyer under the
terms of a contract, to be forfeited if the buyer defaults but
applied to the purchase price if the sale is closed.
182
easement
A right to limited use and enjoyment of the
land of another for a specific purpose without ownership; a
nonpossessory interest in real estate. Two types of easements
are easement appurtenant and easement in gross.
183
easement appurtenant
An easement that runs with
the land; the easement is part of both the dominant and the
servient tracts and conveys with the title to either tenement.
184
easement by necessity
An easement allowed by law
as necessary for the full enjoyment of a parcel of real estate;
i.e., to allow a landlocked owner a right of ingress and
egress over a grantor’s land.
185
easement by prescription
An easement acquired
through adverse use of another’s property for a period of 20
or more years in North Carolina.
186
easement in gross
An easement that is not created for
the benefit of any land owned by the owner of the easement
but that attaches personally to the easement owner. There
is no dominant tract; the easement attaches to the servient
tract. Personal easement in gross is not assignable; a
commercial easement in gross is assignable.
187
eave
The overhang of a sloping roof that extends beyond
the walls of the house.
188
economic life
The number of years during which an
improvement will add value to the land.
189
effective age
The apparent age of a building based on
observed condition rather than chronological age.
190
effective gross income (EGI)
The anticipated income
from a rental property resulting from potential gross
income minus an allowance for vacancy and bad debts.
191
electromagnetic fields (EMFs)
Naturally occurring
energy fields near power lines and electrical appliance
thought to be linked with adverse health effect but research
is inconclusive.
192
emblements
Growing crops, such as grapes and corn,
that are produced annually through labor and industry; also
called fructus industriales. Usually considered to be personal
property.
193
eminent domain
The right of a government or
municipal quasi-public body to acquire property for public
use through a court action called condemnation, in which
the court decides that the use is a public use and determines
fair compensation to be paid to the owner.
194
employee
Someone who works as a direct employee
of an employer and has employee status. The employer is
obligated to withhold income taxes and Social Security
taxes from the compensation of the employee.
195
employment contract
A document evidencing formal
employment between employer and employee or between
principal and agent. In real estate, this is generally a listing
agreement, a buyer agency agreement or a management
agreement.
196
enabling act
State legislation that confers zoning
powers on municipal governments.
197
encapsulation
Sealing off environmental hazards
instead of removal.
198
encroachment
An unauthorized intrusion of an
improvement, or any part of an improvement, on the real
property of another party; can make title to both parcels
unmarketable. Best discovered by survey.
199
encumbrance
Any charge, claim, lien, or liability held
by someone other than the owner of property that may
diminish the value or use and enjoyment of a property. May
not prevent the transfer of title.
200
endorsement
In an insurance policy, coverage added to
the general policy; a rider
201
Equal Credit Opportunity Act (ECOA)
The federal
law that prohibits discrimination in the extension of credit
because of race, color, religion, national origin, sex, age, or
marital status.
202
equitable title
(1) The interest held by the grantor in a
deed of trust that allows possession and use of the pledged
property. (2) The interest held by a vendee under a contract
for deed or an installment contract; the equitable right to
obtain absolute ownership to property when legal title is
held in another’s name.
203
equity
The interest or value that an owner has in
property over and above any indebtedness.
204
equity buildup
That portion of the loan payment
directed toward the principal rather than the interest, plus
any gain in the property value due to appreciation.
205
equity of redemption
The right of a borrower in
default on a mortgage loan to reclaim the forfeited property
prior to the foreclosure sale through payment in full of all
debt and associated costs.
206
erosion
The gradual wearing away of land by water,
wind, or other natural forces; the diminishing of property
by the elements may cause loss of ownership.
207
escheat
The reversion of property to the state, as
provided by state law, in cases where a decedent dies
intestate without heirs capable of inheriting or when the
property is abandoned.
208
escrow
The closing of a transaction through a third
party called an escrow agent who receives certain funds and
documents to be delivered upon the performance of certain
conditions outlined in the escrow instructions.
209
escrow account
The trust account established by
a broker under the provisions of the license law for
the purpose of holding funds on behalf of the broker’s
principal or some other person until the consummation or
termination of a transaction.
210
estate taxes
Federal taxes on a decedent’s real and
personal property
211
estate (tenancy) at sufferance
The tenancy of a lessee
who lawfully comes into possession of a landlord’s real
estate but who continues to occupy the premises after the
lease has expired against the landlord’s wishes.
212
estate (tenancy) at will
An estate that gives the lessee
the right to possession until the estate is terminated by
either party; the term of this estate is indefinite and no
prior notice to terminate is needed.
213
estate (tenancy) for years
A possessory interest in
property for a definite period of time leased for a specified
consideration.
214
estate (tenancy) from period to period
A possessory
interest in leased property that automatically renews from
period to period—week to week, month to month, or year
to year; notice is necessary to terminate. Also called periodic
tenancy.
215
estoppel
A method of creating an agency relationship
in which a person states incorrectly that a second person
is the first person’s agent and a third person relies on that
representation.
216
ethics
The system of moral principles and rules that
becomes the standard for conduct.
217
eviction
A legal process to oust a person from possession
of real estate.
218
evidence of title
Proof of ownership of property;
commonly a certificate of title, an abstract of title with
lawyer’s opinion, or a Torrens registration certificate
219
excise tax
Deed transfer tax paid by the seller and
required to be noted on a deed by state law; the rate is $1
per $500 of sales price.
220
exchange
A transaction in which all or part of the
consideration is the transfer of like-kind property (such as
investment real estate for investment real estate).
221
exclusion
Something that is not covered for loss in an
insurance policy
222
exclusive-agency listing
A listing contract under
which the owner appoints a real estate broker as the
exclusive agent for a designated period of time to sell the
property, on the owner’s stated terms, for a commission.
The owner reserves the right to sell without paying anyone
a commission if the owner sells to a prospect who has not
been introduced or claimed by the broker.
223
exclusive right-to-sell listing
A listing contract
under which the owner appoints a real estate broker as the
exclusive agent for a designated period of time to sell the
property, on the owner’s stated terms, and agrees to pay the
broker a commission when the property is sold, regardless
of who sells the property.
224
executed contract
A contract in which all parties have
fulfilled their promises in the contract.
225
execution
The signing and delivery of an instrument.
Also, a legal order directing an official to enforce a
judgment against the property of a debtor.
226
executory contract
A contract under which something
remains to be done by one or more of the parties.
227
express agreement/contract
An oral or written
contract in which the parties state the contract’s terms and
express their intentions in words.
228
express authority
An agent’s power to act on behalf of
a principal, explicitly granted by an agreement between the
agent and principal.
229
extender clause
A carry-over or protection clause in
a listing contract that says the listing broker is entitled to
commission for a time period after expiration of the listing
term if the property is transferred to a prospect that the
broker introduced to the property during the listing term;
override clause. This clause is void if the property is listed
with another broker.
230
external depreciation
The reduction in a property’s
value caused by outside factors (those that are off the
property).
231
extra-territorial jurisdictions (ETJs)
A municipality’s
right to regulate development in areas adjacent to but not
part of the city’s corporate limits. Population determines
if the power extends for 1 to 3 miles from the corporate
limits.
232
facilitator
The real estate licensee who assists buyers and
sellers in reaching an agreement in a real estate transaction
without representing interests of either party. The licensee
treats both parties equally as customers.
233
Fannie Mae (FNMA)
A quasi-government agency
established to purchase any kind of mortgage loans in the
secondary mortgage market from the primary lenders
234
fascia board
A flat strip of wood or metal that encloses
the ends of the rafters; gutters are usually attached to the
fascia board.
235
Federal Emergency Management Agency (FEMA)
A federal agency responsible for disaster preparedness,
response and recovery. Now under Department of
Homeland Security.
236
Federal Fair Housing Act
The federal law that prohibits
discrimination in housing based on race, color, religion, sex,
handicap, familial status, or national origin.
237
Federal Reserve System
The country’s central banking
system, which controls the nation’s monetary policy by
regulating the supply of money and interest rates.
238
fee-for-service agreement
Arrangement where
consumer asks licensee to perform specific real estate
services for a set fee; unbundling of services; limited service
firms.
239
fee simple absolute
The maximum possible estate
in real property; most complete and absolute ownership;
indefinite in duration, freely transferable and inheritable.
240
fee simple determinable
An estate in real estate that
continues “so long as” a prescribed land use continues.
Estate ends automatically upon the termination of the
prescribed use; no lawsuit is necessary for reversion.
241
fee simple subject to a condition subsequent
An
estate in real estate that prohibits a specific condition on the
property. Grantor has the right to re-enter the property and
reclaim ownership through legal proceedings.
242
FHA loan
A loan insured by the Federal Housing
Administration and made by an approved private lender in
accordance with the FHA’s regulations.
243
fiduciary
One in whom trust and confidence are placed;
a reference to a principal-agent relationship
244
first substantial contact
A flexible moment in time
when conversation between a licensee and a consumer
begins to address confidential needs, desires and abilities;
latest moment to legally disclose agency choices to a
consumer.
245
fixture
An item of personal property that has been
converted to real property by being permanently affixed to
the realty
246
flood hazard area
Property identified by flood
certification to be in a flood-prone area with a likelihood
that a flood may occur once every 100 years and therefore
usually requiring flood insurance if federally related
financing is involved.
247
floor joist
A horizontal board laid on edge, resting on
the beams that provide the main support for the floor. The
subflooring is nailed directly to the joists.
248
footing
A concrete support under a foundation,
chimney, or column that usually rests on solid ground and
is wider than the structure being supported. Footings are
designed to distribute the weight of the structure over the
ground.
249
foreclosure
A legal procedure whereby property used
as security for a debt is sold to satisfy the debt in the event
of default in payment of the mortgage note or default of
other terms in the mortgage document. The foreclosure
procedure brings the rights of all parties to a conclusion
and passes the title in the mortgaged property to either the
holder of the mortgage or a third party who may purchase
the realty at the foreclosure sale, free of all liens affecting
the property subsequent to the mortgage.
250
foreshore
Land at the coast between average high tide
and average low tide this is owned by the state of North
Carolina.
251
foundation wall
The masonry or concrete wall below
ground level that serves as the main support for the frame
structure. Foundation walls form the side walls of the
basement or crawlspace.
252
frame
The wooden skeleton of the house consisting of
the floors, walls, ceilings, and roof.
253
fraud
An intentional misrepresentation of material fact
so as to harm or take advantage of another person.
254
Freddie Mac
A corporation established to purchase
primarily conventional mortgage loans in the secondary
mortgage market.
255
freehold estate
An estate in land in which ownership
is for an indeterminate length of time, in contrast to a
leasehold estate.
256
friable
A dry, crumbly condition often used to describe
old asbestos.
257
frieze board
A wooden board fastened at the top of the
exterior wall under the eave soffit to prevent penetration of
weather elements; frequently the base for additional exterior
decorative trim.
258
front footage
The measurement of a parcel of land
by the number of feet of street or road frontage, or water
frontage.
259
frontage
The length of property along the street or
waterfront.
260
fructus naturales
Plants that do not require annual
cultivation and are considered real property.
261
functional obsolescence
A loss of value to an
improvement to real estate arising from functional
problems, often caused by age or poor design.
262
future interest
A person’s present right to an interest
in real property that will not result in possession or
enjoyment until sometime in the future, such as a reversion
or right of reentry
263
gable
The triangular portion of an end wall rising
from the level top wall under the inverted V of a sloping
roof that aids water drainage. A gable can be made of
weatherboard, tile, or masonry and can extend above the
rafters.
264
gambrel
A curb roof, having a steep slope and a flatter
one above, as seen in Dutch colonial architecture.
265
gap
A defect in the chain of title of a particular parcel
of real estate; a missing document or conveyance that raises
doubt as to the present ownership of the land.
266
general agent
One who is authorized to represent the
principal in a broad range of matters related to a specific
business or activity; a property manager might have this
power.
267
general lien
The right of a creditor to have all of a
debtor’s current and future property for the next 10 years—
both real and personal—sold to satisfy a debt; i.e. judgment
lien.
268
general warranty deed
A deed in which the grantor
fully warrants good clear title to the premises through
four covenants in the deed. Used in most real estate
deed transfers, a general warranty deed offers the greatest
protection to the grantee of any deed.
269
Ginnie Mae
A government agency under HUD that
plays an important role in the secondary mortgage market.
It sells mortgage-backed securities that are backed by pools
of FHA and VA loans.
270
girder
A heavy wooden or steel beam supporting the
floor joists and providing the main horizontal support for
the floor.
271
graduated lease
A commercial lease that contracts for
pre-set rental increases over the lease period.
272
graduated payment mortgage (GPM)
A loan in
which the monthly principal and interest payments increase
by a set amount each year for a certain number of years
and then level off for the remaining loan term; probable
negative amortization in early years.
273
grantee
A person who receives a conveyance of real
property from a grantor.
274
granting clause
Words in a deed of conveyance that
state the grantor’s intention to convey the property at the
present time. This clause is generally worded as convey and
warrant, grant, bargain and sell, or the like.
275
grantor
(1) The property owner that is transferring
title to or an interest in real property to a grantee. (2) A
borrower in a deed of trust loan transaction; also called
trustor.
276
gross income multiplier (GIM)
A figure used as
a multiplier of the gross annual income of a property
to produce an estimate of the property’s value.
277
gross lease
A lease of property under which a landlord
pays all property charges regularly incurred through
ownership, such as repairs, taxes, insurance, and operating
expenses. Most residential leases are gross leases; also called
flat or fixed rental lease.
278
gross rent multiplier (GRM)
The figure used as a
multiplier of the gross monthly income of a property to
produce an estimate of the property’s value.
279
ground lease
A lease of land only, on which the tenant
usually is required to build as specified in the lease. Such
leases are usually long-term net leases.
280
groundwater
Water under the surface of the earth.
281
growing-equity mortgage (GEM)
A loan in which
the monthly payments increase annually, with the increased
amount being used to reduce directly the principal balance
outstanding and thus shorten the overall term of the loan.
282
header
The extra thick framing over doors and windows
to bear the weight of the building above the opening.
283
heir
One who might inherit or succeed to an interest in
land under the state law of descent when the owner dies
without leaving a valid will.
284
hereditaments
Any interests in real estate capable of
being inherited.
285
highest and best use
The possible use of a property
that would produce the greatest net income and thereby
develop the highest value.
286
hip roof
A pitched roof with sloping sides and ends
287
historic preservation zoning
Zoning to preserve the
historic nature of a particular property or neighborhood.
Change will require a certificate of appropriateness from the
necessary regulatory power.
288
holdover tenant
A person who retains possession of
leased property after the lease has expired; the landlord may
continue to accept rent or start eviction procedures.
289
home equity loan
A loan (sometimes called a line of
credit) under which a property owners use their residence
as collateral and can then draw funds up to a prearranged
amount against the property.
290
homeowners association (HOA)
An organization
of property owners in a subdivision, planned community,
or condominium that makes and enforces rules for the
properties within its jurisdiction.
291
homeowners insurance policy
A standardized
package insurance policy that covers a residential real estate
owner against financial loss from fire, theft, public liability,
and other common risks.
292
homestead
Land that is owned and occupied as the
family home. In many states, a portion of the area or value
of this land is protected for exempt from judgments for
debts.
293
house wrap
a synthetic material used to protect
buildings.
294
Housing and Community Development Act of 1974
An act that added gender as a protected class under the
Federal Fair Housing Act.
295
HUD
See Department of Housing and Urban
Development.
296
HUD-1 settlement statement
A type of settlement
statement, replaced with the Closing Disclosure form in
many residential transactions since October 2015.
297
HVAC
An acronym for heating, ventilation, and
air-conditioning.
298
hypothecation
The pledging of property as security for
an obligation or a loan without losing possession of it.
299
implied agreement/contract
A contract under which
the agreement of the parties is demonstrated by their
conduct.
300
implied authority
An agency relationship created when
principals and agents, without formally agreeing to the
agency, act as if one exists.
301
implied warranty of habitability
A theory in
landlord/tenant law in which the landlord renting
residential property implies that the property is habitable
and fit for its intended use.
302
improved land
Land that has a building or buildings
on it or land that has been prepared for development, such
as with grading, installation of utilities, et cetera.
303
improved lot
A lot that certain basic required services
necessary to utilize it are available, such as electricity,
telephone, street access, or water access.
304
improvement
(1) Any structure, usually privately
owned, erected on a site to enhance the value of the
property—for example, a fence or a driveway. (2) A
publicly owned structure added to or benefiting land, such
as a curb, sidewalk, street, or sewer.
305
income capitalization approach
The process of
estimating the value of an income-producing property
through capitalization of the annual net income expected
to be produced by the property during its remaining useful
life.
306
independent contractor
Someone who is retained
to perform a certain act but who is subject to the control
and direction of another only as to the end result and not
as to the way in which the act is performed. Unlike an
employee, an independent contractor pays all expenses and
Social Security and income taxes and receives no employee
benefits. Most real estate licensees are independent
contractors.
307
index lease
A commercial lease that allows the periodic
adjustment of rent based on a named index such as
Consumer Price Index (CPI).
308
inflation
The gradual reduction of the purchasing power
of the dollar, usually related directly to the increases in the
money supply by the federal government.
309
inheritance taxes
State-imposed taxes on a decedent’s
real and personal property.
310
in-house sale
A real estate transaction where the listing
firm actually produces the buyer for their listing, as opposed
to a co-brokered or cross sale that involves two firms.
311
installment land contract
A contract for the sale
of real estate financed by the seller whereby the purchase
price is paid in periodic installments by the purchaser, who
is in possession of the property even though legal title is
retained by the seller until a future date, which may not be
until final payment. Also called a contract for deed or land
contract.
312
insulation
Pieces of plasterboard, asbestos sheeting,
compressed wood-wool, fiberboard, or other material
placed between inner and outer surfaces, such as walls and
ceilings, to protect the interior from heat loss. Insulation
works by breaking up and dissipating air currents.
313
insured
The property owner who is reimbursed by the
insurer, the insurance company, for losses caused by a
covered event.
314
insurer
The insurance company, which agrees to
reimburse the property owner for losses caused by a covered
event.
315
interest
A charge made by a lender for the use of
money.
316
interim financing
A short-term loan usually made
during the construction phase of a building project (in this
case, often referred to as a construction loan).
317
Interstate Land Sales Full Disclosure Act
A federal
law regulating the interstate advertising and sale or lease of
lots in subdivisions with 25 or more lots. Developer must
provide a property report and register the subdivision with
HUD.
318
intestate
The condition of a property owner who dies
without leaving a valid will. Title to the property will
pass to the decedent’s heirs as provided in the state law of
descent.
319
intrinsic value
An appraisal term referring to the value
created by a person’s personal preferences for a particular
type of property.
320
investment
Money directed toward the purchase,
improvement, and development of an asset in expectation
of income or profits.
321
involuntary lien
A lien placed on property without the
consent of the property owner; such as a judgment lien.
322
joint tenancy
A concurrent form of ownership of real
estate between two or more parties who have been named
in one conveyance as joint tenants. Ownership interest may
be unequal. Right of survivorship is not automatic in North
Carolina but can be added by an attorney.
323
joint venture
The joining of two or more people to
conduct a specific business enterprise. A joint venture
is similar to a partnership in that it must be created by
agreement between the parties to share in the losses and
profits of the venture. It is unlike a partnership in that the
venture is for one specific project only, rather than for a
continuing business relationship.
324
judgment
The formal decision of a court upon the
respective rights and claims of the parties to an action or a
suit. After a judgment has been entered and recorded with
the county recorder, it becomes a general involuntary lien
on the current and future real and personal property of the
debtor in the county where recorded for the next 10 years.
325
judicial foreclosure
The form of foreclosure used in
lien theory states. See foreclosure.
326
jumbo loan
A residential mortgage loan in excess of
acceptable loan amounts for purchase by Fannie Mae or
Freddie Mac; also called nonconforming loans.
327
junior mortgage
A mortgage that is subordinate in
right or lien priority to an existing lien on the same realty.
328
laches
A legal doctrine to bar a legal claim or prevent
the assertion of a right because of undue delay or failure to
assert the claim or right.
329
land
The earth’s surface, extending downward to the
center of the earth and upward infinitely into space,
including things permanently attached by nature, such as
trees and water.
330
landfill
An enormous burial hole for various types of
waste disposal.
331
lateral support
The support a parcel of land receives
from adjacent land; a neighbor’s duty to support adjoining
land in its natural state.
332
law of negligence
If a tenant or guest is injured on the
landlord’s rental property, the landlord, and his/her agent,
may be held liable due to their responsibility to maintain
common areas and comply with the Residential Rental
Agreement Act.
333
Lead-Based Paint Hazard Reduction Act
A federal
law that requires sellers/landlords to disclose the known
presence of lead-based paint in residential property to
potential buyers/tenants via a required disclosure addendum
to sales contracts or leases; delivery of a mandatory EPA
pamphlet about lead poisoning is also required. Buyer/
tenant is allowed a 10-day assessment period.
334
lease
A written or an oral contract between a landlord
(the lessor) and a tenant (the lessee) that transfers the
right to exclusive possession and use of the landlord’s real
property to the lessee for a specified period of time and for
a stated consideration (rent).
335
leasehold estate
A tenant’s right to occupy real estate
during the term of a lease, generally considered a personal
property interest; nonfreehold estate.
336
lease option
A lease under which the tenant has the
right to purchase the property either during the lease term
or at its end.
337
lease purchase
The purchase of real property, the
consummation of which is preceded by a lease, usually
long-term; typically done for tax or financing purposes.
338
legal description
A description of a specific parcel of
real estate complete enough for an independent surveyor to
locate and identify it.
339
legality of object
The purpose of a legally enforceable
contract cannot be for illegal actions or acts against public
policy.
340
legally competent parties
People who are recognized
by law as being able to contract with others; those of legal
age and sound mind; a requirement of a legally enforceable
contract.
341
leverage
The use of borrowed money to finance an
investment.
342
levy
To assess; to seize or collect. To levy a tax is to assess
a property and set the rate of taxation. To levy an execution
is to officially seize the property of a person to satisfy an
obligation.
343
liability insurance
Insurance providing protection of
the property owner against financial claims of others.
344
license
(1) A privilege or right granted to a person by
a state to operate as a real estate broker. (2) The personal
revocable nontransferable right to a temporary use of
another’s land—a personal right that cannot be sold.
345
lien
A right given by law to certain creditors to have
their debts paid out of the property of a defaulting debtor,
usually by means of a court sale. An encumbrance on real
property that can be general or specific.
346
lien agent
A title insurance entity that is designated
under the North Carolina Mechanic’s Lien Law by a
real property owner to receive notifications of possible
mechanics’ liens from construction project vendors.
347
lien theory
Some states interpret a mortgage as being
purely a lien on real property. The mortgagee thus has no
right of possession but must foreclose the lien and sell the
property if the mortgagor defaults.
348
life estate
An interest in real or personal property that
is limited in duration to the lifetime of its owner or some
other designated person or persons.
349
life tenant
A person in possession of a life estate.
350
limited common elements
Common elements of a
condominium project reserved for the exclusive use of one
or more units, such as parking spaces or storage areas.
351
limited liability company (LLC)
A hybrid business
entity with combined characteristics and benefits of a
limited partnership and an S corporation.
352
limited services agreement
`Also known as a
fee-for-services agreement, a listing agreement that offers a
menu of services and fees for separate broker activities that
the client desires (unbundling of services).
353
liquidated damages
An amount predetermined by
the parties to a contract as compensation to an injured
party if the other party breaches the contract.
354
liquidity
The ability to sell an asset and convert it into
cash, at a price close to its true value, in a short period of
time.
355
lis pendens
A recorded legal document giving
constructive notice that an action potentially affecting
title to a particular property has been filed in either a state
or a federal court; title is effectively unmarketable during
the litigation.
356
listing agreement
An employment contract between a
property owner (as principal) and a real estate firm/broker
(as agent) by which the broker is employed to find a ready,
willing and able buyer for the owner’s real estate on the
owner’s terms, for which service the owner agrees to pay a
commission.
357
listing broker
The broker/firm in a multiple-listing
situation representing the seller, as opposed to the
cooperating broker/firm, that brings the buyer to the
transaction. The listing broker and the cooperating broker
may be the same person/firm.
358
littoral rights
(1) A landowner’s claim to use water in
large navigable lakes and oceans adjacent to the property.
(2) The ownership rights to land bordering these bodies of
water up to the average high-water mark.
359
Loan Estimate (LE)
As of 2015, a form required to be
given by lenders to most residential mortgage borrowers
outlining loan expenses.
360
loan fraud
A crime in which the purpose is to
misrepresent or omit information on a mortgage
application in order to obtain a loan or a larger loan than
could have been obtained had the lender known the truth.
361
loan origination fee
An administrative fee charged to
the borrower by the lender for making a mortgage loan;
usually computed as a percentage of the loan amount.
362
loan-to-value (LTV) ratio
The relationship between
the amount of the mortgage loan and the value of the
real estate being pledged as collateral.
363
lot-and-block (recorded plat) system
A method of
describing real property that identifies a parcel of land by
reference to lot and block numbers within a subdivision, as
specified on a recorded subdivision plat.
364
Machinery Act
The North Carolina General Statutes
that govern the ad valorem taxation of property.
365
mailbox rule
A rule of law stating that once written
acceptance is placed in control of the mailing service, and
out of the control of the offeree, it is considered accepted—
not when the acceptance is actually received by the offeror.
366
mansard roof
An architectural style in which the top
floor or floors of a structure are designed to appear to be the
roof. Such a roof has two slopes on each of the four sides of
the building, with the upper slope less steeply inclined.
367
manufactured home
A dwelling, also known as a
mobile home or house trailer; built under HUD regulations
with a permanent chassis. It is considered personal property
until the moving hitch, wheels and axles are removed, the
unit is attached to a permanent foundation on land owned
by the owner of the manufactured home, and an affidavit
attesting to these actions has been filed with the Dept. of
Motor Vehicles.
368
marital life estate
North Carolina law permits that
when someone dies without a will, or dies with a will
disinheriting a spouse or leaving him or her very little that
the surviving spouse may choose an “elective share” of the
estate instead.
369
market
A place where goods can be bought and sold
and value established.
370
marketable title
A good or clear title, reasonably free
from the risk of litigation over possible defects.
371
Marketable Title Act
The act is designed to eliminate
obsolete defects in a chain of title. If a chain of title can be
traced back for 30 years without a problem, it becomes a
marketable title.
372
market value
The most probable price property
will bring in an arm’s-length transaction under normal
conditions on the open market.
373
mass appraisal
A valuation technique sometimes
used for tax assessment purposes that applies a standard
percentage increase or decrease to all property in a given
location; sometimes referred to as horizontal adjustments.
374
master plan
A comprehensive plan to guide the
long-term physical development of a particular area.
375
material fact
Any fact that is important or relevant to
the issue at hand; mandatory disclosure by all agents in a
transaction to all parties of the transaction.
376
mechanic’s lien
A specific, involuntary lien secured
by interest in real property to give security to contractors,
laborers, and materialmen who have performed work or
furnished materials in the erection or repair of a building.
377
metes-and-bounds (boundary) description
A legal
description of a parcel of land that begins at a well-marked
point and follows the boundaries, using directions and
distances around the tract, back to the place of beginning.
378
mill
One-tenth of one cent. Some states use a mill rate
to compute real estate taxes; for example, a rate of 52 mills
would be $0.052 tax for each dollar of assessed valuation of
a property.
379
Mineral and Oil and Gas Rights Mandatory Disclosure
Statement
Since 2015, a separate North Carolina
disclosure form that must be completed by most sellers of
residential dwellings regarding the status of mineral, oil,
and gas rights.
380
minor
Someone who has not reached the age of majority
and therefore does not have legal capacity to transfer title to
real property; under 18 years of age in North Carolina.
381
mitigation
Systems to limit the source of environmental
hazards and reduce their effect on humans and the
surrounding environment.
382
modular home
A dwelling consisting of a series
of rooms or units built off site according to the North
Carolina State Building Code; is considered real property as
soon as it is assembled on the land. May be multistoried.
383
monetary policy
Governmental regulation of the
amount of money in circulation through such institutions
as the Federal Reserve Board.
384
monument
A fixed natural or artificial object used to
establish real estate boundaries for a metes-and-bounds
description.
385
mortgage
A conditional transfer or pledge of real
estate as security for the payment of a debt. Also,
the document creating a mortgage lien in a lien theory
state.
386
mortgage banker
A mortgage loan company that
originates, services, and sells loans to investors.
387
mortgage broker
An agent of a lender who brings
the lender and borrower together for a fee. A broker may
represent several lenders.
388
mortgagee/mortgagor
A mortgagee is the lender in a
mortgage loan transaction; a mortgagor is the borrower in a
mortgage loan transaction.
389
mortgage lien
A lien or charge on the property of
a mortgagor that secures the underlying debt obligations.
390
multiperil policy
An insurance policy that offers
protection from a range of potential perils, such as those of
fire, hazard, public liability, and casualty.
391
multiple listing service (MLS)
A marketing
organization composed of member brokers who agree
to share their listing agreements with one another in the
hope of procuring ready, willing, and able buyers for
their properties more quickly than they could on their
own. Most MLSs accept only exclusive right-to-sell or
exclusive-agency listings from their member brokers.
392
mutual assent
A deliberate agreement between
parties; offer and acceptance; “meeting of the minds.” A
requirement of a legally enforceable contract.
393
National Do Not Call Registry
A national registry,
managed by the Federal Trade Commission, that lists
the phone numbers of consumers who prefer to limit the
telemarketing calls they receive.
394
National Flood Insurance Program (NFIP)
A federal
program which aims to reduce the impact of flooding on
private and public structures.
395
NCBA/NCAR 2-T Offer to Purchase and Contract
(OPC)
A form often used by REALTOR®/licensees and/
or North Carolina attorneys to establish a legally binding
agreement between the buyer and seller concerning the
terms of purchase or transfer of residential real property.
396
negative amortization
When the debt service payment
on a loan is not large enough to pay the interest due; the
principal balance actually grows with each payment.
397
negligent misrepresentation
Unintentionally
misinforming any party involved in a transaction about a
material fact.
398
negligent omission
Unintentionally failing to disclose
a material fact to any party involved in a transaction.
399
negotiable instrument
A written promise or order
to pay a specific sum of money that may be transferred
by endorsement or delivery. The transferee then has the
original payee’s right to payment.
400
net lease
A lease requiring that the tenant pay rent plus
some or all of the property charges, such as taxes, insurance,
utilities, and repairs.
401
net listing
A listing based on the net price the seller
will receive if the property is sold. Under a net listing, the
broker can offer the property for sale at the highest price
obtainable to increase the commission. While this type of
listing is illegal in many states, it is legal but not encouraged
in North Carolina.
402
net operating income (NOI)
The income projected for
an income-producing property after deducting losses for
vacancy and collection and operating expenses.
403
nonagency
A relationship between a licensee and
consumers where the licensee represents neither the buyer
not the seller; this relationship is not allowed in North
Carolina.
404
nonconforming use
An existing use of property that is
permitted to continue after a zoning ordinance prohibiting
it has been established for the area; a use that has been
grandfathered in and is legal. Illegal nonconforming use
occurs when zoning in place before the prohibited use.
405
nonhomogeneity
A lack of uniformity; dissimilarity;
heterogeneity. Because no two parcels of land are exactly
alike, real estate is said to be nonhomogeneic.
406
nonprovisional broker
A North Carolina real estate
licensee that has completed the 90-hour postlicensing
education to remove the provisional license status; also
called a full broker.
407
North Carolina Condominium Act of 1986
Specifies
that a condominium is created and established when the
developer of the property executes and records a declaration
of its creation in the county where the property is located.
The declaration must include any covenants, conditions, or
restrictions on the use of the property. Other requirements
include disclosure and other consumer protection measures
in connection with new residential condominium unit
sales.
408
North Carolina Fair Housing Act of 1983
State fair
housing law containing similar prohibitions to those of the
federal fair housing law. Unlike the federal law, however,
the North Carolina law does not exempt owners who are
selling their own property, and it does exempt the rental of
a unit in a one-unit to four-unit residential building if the
owner or one of the owner’s family members lives in one of
the units.
409
North Carolina Human Relations Council
The state
agency responsible for enforcing the North Carolina Fair
Housing Act.
410
North Carolina Intestate Succession Act
The state
law of descent that dictates distribution of the real and
personal property of the deceased that died without a will
(intestate).
411
North Carolina Lead-Based Paint Hazard
Management Program
A state regulation that requires
the sampling of lead dust by compensated technicians, and
can include the renovation, repair, and painting projects
that disturb lead-based paint in housing and child-occupied
facilities built before 1978; technicians must be certified
and must follow specific work practices to prevent lead
contamination.
412
North Carolina Real Estate Commission
The state
governmental agency whose primary duties include making
rules and regulations to protect the general public involved
in real estate transactions, granting licenses to real estate
brokers, and suspending or revoking licenses for cause.
413
North Carolina Residential Property Disclosure
Act
The state law that requires sellers to provide a
prescribed property disclosure statement to any prospective
buyer prior to presentation of first offer on the property.
Exemptions include new construction, foreclosed
properties, and lease purchases but not for sale by owner
transactions.
414
North Carolina Time Share Act
The portion of
North Carolina real estate law that defines time-shares and
regulates their development and sales.
415
North Carolina Uniform Commercial Code (UCC)
A North Carolina statute which may protect the buyers
from a seller’s unpaid debts; however, if a homeowner
purchases an item on credit and gives the creditor a security
agreement, that item remains personal property and may be
removed by the creditor in the event of default.
416
novation
Substituting a new contract for an old one
or substituting new parties to an existing contract.
417
obsolescence
The loss of value due to factors that are
outmoded or less useful. Obsolescence may be functional or
economic.
418
occupancy permit
A permit issued by the appropriate
local governing body to establish that the property is
suitable for habitation by meeting certain safety and health
standards.
419
octennial reappraisal
In North Carolina, the statutory
reappraisal of all real property in every county every eight
years for tax purposes.
420
offer
The promise by one party to act or perform in a
certain manner if the other party agrees to act or perform as
requested; shows an intention to enter into a contract.
421
offer and acceptance
Two essential components of a
valid contract; See mutual assent and acceptance.
422
offeree
The person receiving the offer is the offeree.
423
offeror
The person who makes the offer is the offeror.
424
Office of Equal Opportunity (OEO)
The federal agency
under the direction of the secretary of the Department of
Housing and Urban Development, which is in charge of
administering the Federal Fair Housing Act.
425
Office of Thrift Supervision (OTS)
Monitors and
regulates the savings and loan industry. OTS was created
by the Financial Institutions Reform, Recovery, and
Enforcement Act (FIRREA).
426
OLD CAR
The mnemonic for fiduciary duties of
obedience, loyalty, disclosure of information, obedience,
confidentiality, accounting, disclosure of information, and
reasonable skill, care, and diligence
427
open-end loan
A mortgage loan that is expandable by
increments up to a maximum dollar amount, the full loan
being secured by the same original mortgage; an equity line
mortgage.
428
open listing
A listing agreement under which the
broker’s commission is contingent on the broker personally
producing a ready, willing, and able buyer before the
property is sold by the seller or another broker.
429
operating expenses
Periodic and necessary expenses
essential to the continuous operation and maintenance of
an income property.
430
operating statement
A detailed statement prepared
on a periodic basis showing the financial picture of a
business through the revenues and expenses; profit and loss
statement.
431
opinion of title
An abstract of title that a lawyer has
examined and has certified to be, in the lawyer’s opinion,
an accurate statement of the facts concerning the property
ownership.
432
option
An agreement between the property owner
(optionor) and the possible buyer (optionee), secured by
the payment of an option fee, to buy or not buy property
within a specific time period at terms that have been
negotiated in the underlying contract; also called option to
purchase or option contract.
433
oral buyer agency
A non-exclusive verbal agency
agreement between a firm and a buyer-client. There can
be no time limit on oral agency, but it must be reduced to
writing prior to presentation of first offer.
434
overlay district
A type of zoning that is superimposed
over another type of zoning and can modify the use of the
original zone.
435
package insurance
An insurance policy that combines
the coverage of property insurance and liability insurance.
436
package loan
A real estate loan used to finance the
purchase of both real property and personal property,
such as in the purchase of a furnished home that includes
window coverings and major appliances.
437
parol evidence rule
A rule of evidence providing
that a written agreement is the final expression of
the agreement of the parties, not to be varied or
contradicted by prior or contemporaneous oral or written
negotiations.
438
partition
The division of cotenants’ interests in real
property when all parties do not voluntarily agree to
terminate the co-ownership; takes place through court
procedures.
439
partnership
An association of two or more individuals
who carry on a continuing business for profit as co-owners.
Under the law, a partnership is regarded as a group
of individuals rather than as a single entity. A general
partnership is a typical form of joint venture in which each
general partner shares in the administration, profits, and
losses of the operation. A limited partnership is a business
arrangement whereby the operation is administered by
one or more general partners and funded, by and large, by
limited or silent partners, who are by law responsible for
losses only to the extent of their investments.
440
party wall
A wall that is located on or at a boundary
line between two adjoining parcels of land and is used or is
intended to be used by the owners of both properties; walls
shared between town houses.
441
payment cap
The limit on the amount the monthly
payment can be increased on an adjustable-rate mortgage
when the interest rate is adjusted.
442
percentage lease
A commercial lease, commonly used
for retail tenants; rent is based on the tenant’s gross sales at
the premises. There is usually a small base monthly rental
plus a percentage of any gross sales above a certain amount.
443
percolation test
A test of the soil to determine whether
it will absorb and drain water adequately to use a septic
system for sewage disposal; a soil evaluation test.
444
periodic estate (tenancy)
See estate (tenancy) from
period to period.
445
personal property
Items, called chattels or personalty,
that do not fit into the definition of real property; movable
objects. Examples would include furniture, clothing,
jewelry, money, vehicles, et cetera.
446
physical deterioration
A reduction in a property’s
value resulting from a decline in physical condition; can be
caused by action of the elements or by ordinary wear and
tear.
447
pier
A column, usually of masonry block or
steel-reinforced concrete. Piers are evenly spaced under a
structure to support the weight. May also refer to the part
of the wall between the windows or other openings that
bears the wall weight.
448
pitch
The slope of a roof measured as the vertical
distance in inches (rise) divided by the horizontal distance
in feet (run).
449
plat map
A map of a subdivision indicating the location
and boundaries of individual properties. Generally shows
lots, blocks, easements, streets, floodplains, et cetera.
Usually requires official approval before recordation.
450
point of beginning (POB)
In a metes-and-bounds
legal description, the starting point of the survey, situated at
one corner of the parcel. All metes-and-bounds descriptions
must follow the boundaries of the parcel back to the point
of beginning.
451
police power
The government’s right to impose laws,
statutes, and ordinances, including zoning ordinances and
building codes, to protect the public health, safety, and
welfare.
452
potential gross income
The amount of rental income
the property could produce with 100% occupancy and
with all tenants paying full rent; also called scheduled gross
income.
453
power of attorney
A written instrument authorizing a
person, sometimes referred to as an attorney-in-fact, to act
as agent for another person to the extent indicated in the
instrument.
454
power of sale foreclosure
The form of foreclosure
used in a title theory state, such as North Carolina; also
called nonjudicial foreclosure.
455
predatory lending
Unscrupulous, sometimes
fraudulent, lending practices usually intending to make
repayment impossible; designed to take advantage of
unwary borrowers that are frequently the low-income,
uninformed, elderly, or non-English-speaking.
456
preemptive right
A provision giving a person the
first right to purchase real property; most often found in
commercial leases.
457
premium
The consideration for an insurance policy.
458
prepaid item
On a closing statement, (1) expenses paid
before they are due, such as hazard insurance or rent; also
called prepaids; (2) a lump-sum payment to set up a reserve
account, such as deposits of taxes and insurance to set up
the borrower’s mortgage loan escrow account.
459
prepayment penalty
A charge imposed on a borrower
who pays off the loan principal early. This penalty
compensates the lender for interest and other charges that
would otherwise be lost due to payments made ahead of
schedule.
460
primary mortgage insurance (PMI)
Insurance
coverage used for obtaining conventional loans with
loan-to-value ratios exceeding 80%.
461
primary mortgage market
The mortgage market
in which loans are originated, consisting of lenders such
as commercial banks, savings associations, and mortgage
brokers.
462
principal
(1) A sum loaned or employed as a fund or
an investment, as distinguished from its income or profits.
(2) The original amount (as in a loan) of the total balance
due and payable at a certain date. (3) A main party to a
transaction—the person for whom the agent works; the
client.
463
principal meridian
The main imaginary line running
north and south and crossing a base line at a definite point;
used by surveyors for reference in locating and describing
land under the rectangular (government) survey system of
legal description.
464
priority
The order of position or time. The priority of
liens is generally determined by the chronological order in
which the lien documents are recorded. Property tax and
assessment liens have priority even over previously recorded
liens.
465
private mortgage insurance (PMI)
Insurance
provided by a private carrier that protects a lender against a
loss in the event of a foreclosure and deficiency.
466
probate
A legal process by which a court determines
who will inherit a decedent’s property and what the estate’s
assets are.
467
procuring cause
The effort that began a chain of events
that brings about the desired result. Under an open listing,
the broker who is the procuring cause of the sale receives
the commission.
468
projected or potential gross income (PGI)
The
anticipated annual revenue of an investment property
assuming that the investment property is fully rented for
the following 12 months.
469
promissory note
A financing instrument that states the
terms of the underlying obligation, is signed by its maker,
and is negotiable (transferable to a third party); a personal
IOU.
470
property insurance
A policy that provides property
owner coverage for the basic structure on that property.
471
property management agreement
An agency
contract between the owner of income property and a
management firm or an individual property manager that
outlines the scope of the manager’s authority.
472
property manager
Broker who for compensation
preserves the value of an investment property while
generating income as an agent for the owner. Duties
include collecting rents, maintaining the property, and
keeping up all accounting.
473
property report
The mandatory federal and/or state
documents compiled by developers to provide potential
purchasers with material facts about a property prior to its
purchase.
474
proprietary lease
A lease given by the corporation that
owns a cooperative apartment building to the shareholder
for the shareholder’s right as a tenant to an individual
apartment.
475
prorations
Shared expenses, either prepaid or paid in
arrears, that are divided equitably between buyer and seller
at settlement.
476
protected class
Any group of people designated
as such by statute in consideration of federal and state civil
rights and lending legislation; currently includes familial
status, marital status, age, race, gender, handicapping
condition, color, religion, source of income, and national
origin.
477
protection agreement
An agreement between an
unlisted property owner and a broker to secure payment
for the broker if the property is sold to the particular buyer
named in the agreement; it does not create a general listing,
and may not create agency at all—only compensation for a
buyer’s agent. Sometimes called a one-shot listing.
478
provisional broker
A real estate licensee who performs
real estate activities under the supervision of a licensed
real estate broker-in-charge. Must complete postlicensing
courses to remove the provisional license status.
479
public offering statement
The document all
prospective time-share purchasers must receive before
signing a sales contract. The statement must disclose all
material facts about the property, as required by the state.
480
puffing
Exaggerated or superlative comments or
opinions: e.g. “This house has the best view in town!”
481
pur autre vie
For the life of another. A life estate pur
autre vie is a life estate that is measured by the life of a
person other than the grantee.
482
purchase money mortgage
A note secured by a
mortgage or deed of trust given by a buyer, as borrower, to
a seller, as lender, as part of the purchase price of the real
estate.
483
quantity-survey method
The appraisal method of
estimating building costs by calculating the cost of all of
the physical components in the improvements, adding the
cost to assemble them, and then including the indirect costs
associated with such construction.
484
quiet title
A court action to remove a cloud on the title.
485
quitclaim deed
A conveyance by which the grantor
transfers interest in the real estate, if any, without warranties
or obligations; frequently used to remove clouds on the
title.
486
radon
A colorless, odorless radioactive gas that naturally
occurs in all areas of the state from the decay of radioactive
minerals in the ground; EPA suggests that a reading of
4.0 picocuries or higher is cause for a mitigation system.
Considered to be one of the leading causes of lung cancer.
487
rafter
One of a series of sloping beams that extends from
the center ridge board to an exterior wall and provides the
main support for the roof.
488
range
A strip of land six miles wide, extending north
and south and numbered east and west according to its
distance from the principal meridian in the rectangular
(government) survey system of legal description.
489
rate cap
The limit on the amount the interest rate can
be increased at each adjustment period in an adjustable rate
loan. The cap may also set the maximum interest rate that
can be charged during the life of the loan.
490
rate lock
A guarantee from mortgage lenders that they
will give mortgage loan applicants a certain interest rate, at
a certain price, for a specific time period.
491
ratification
A method of creating an agency relationship
in which the principal accepts/confirms the conduct of
someone who acted without prior authorization as the
principal’s agent.
492
ready, willing, and able buyer
One who is prepared
to buy property on the seller’s terms and is ready to take
positive steps to consummate the transaction; one of the
agent’s requirements for entitlement to commission.
493
real estate
Land; a portion of the earth’s surface
extending downward to the center of the earth and upward
infinitely into space, including all things permanently
attached to it, whether naturally or artificially.
494
real estate investment trust (REIT)
Trust ownership
of real estate by a group of individuals who purchase
certificates of ownership in the trust, which in turn invests
the money in real property and distributes the profits back
to the investors free of corporate income tax.
495
real estate license law
The state law enacted to protect
the public from fraud, dishonesty, and incompetence when
dealing with real estate licensees in the purchase and sale of
real estate.
496
real estate mortgage investment conduit (REMIC)
A tax entity that issues multiple classes of investor interests
(securities) backed by a pool of mortgages.
497
real estate recovery fund
A fund established in some
states from real estate license revenues to cover claims of
aggrieved parties who have suffered monetary damage
through the actions of a real estate licensee.
498
Real Estate Settlement Procedures Act (RESPA)
Federal law that ensures that residential buyers and sellers
receive full disclosure of all settlement charges when a
1–4 family unit residence is financed by federally-related
first mortgage loans. The Act mandates a HUD booklet
about closing costs, a loan estimate of closing costs, and
a standardized closing statement. The Act, known as
Regulation X, also prohibits kickbacks from lenders.
499
reality of consent
If misrepresentation, fraud, mistake
of fact, undue influence or duress are absent in contract
formation, good contract is formed.
500
real property
The land plus permanent improvements
and the interests, benefits, and rights inherent in real estate
ownership.
501
REALTOR®
A registered trademark term reserved for the
sole use of active members of local REALTORS® boards
affiliated with the National Association of REALTORS®.
502
reconciliation
The final step in the appraisal process,
in which the appraiser combines the estimates of value
received from the sales comparison, cost, and income
capitalization approaches to arrive at a final estimate of
market value for the subject property.
503
recording
The act of entering or recording documents
into the public record at the recorder’s office established in
each county. Until recorded, a deed or mortgage ordinarily
is not effective against third parties, such as subsequent
purchasers or mortgagees.
504
rectangular (government) survey system
A
system established in 1785 by the federal government,
providing for surveying and describing land by reference to
principal meridians and base lines; used mainly west of the
Mississippi River.
505
redemption period
A 10-day period of time after
a foreclosure auction during which a property owner in
default has the right to redeem the pledged real estate by
paying the loan balance plus interest, and costs; also called
the upset bid period.
506
redlining
The illegal practice of a lending institution
denying loans or restricting their number for certain areas
of a community.
507
reduction certificate (payoff statement)
The
document signed by a lender indicating the amount
required to pay a loan balance in full and satisfy the debt;
used in the settlement process to protect both the seller’s
and the buyer’s interests.
508
registration certificate
The document that developers
of time-shares in North Carolina must obtain from the
North Carolina Real Estate Commission before they can
offer a project’s time-shares for sale to the public.
509
regression
An appraisal principle that states that
between dissimilar properties, the value of the better quality
property is affected adversely by the presence of the lesser
quality property.
510
Regulation X
The rules which implement and interpret
the Real Estate Settlement Procedures Act (RESPA) of
1974.
511
Regulation Z
Implements the Truth in Lending Act
requiring credit institutions to inform borrowers of the true
cost of obtaining credit.
512
reliction
Gradual recession of water which uncovers
land that usually belongs to the riparian owner.
513
remainder interest
A future interest in real estate
created by the grantor for some third party that will be
enjoyed after the termination of a prior estate, such as
when an owner conveys a life estate to one party and the
remainder to another.
514
remainderman
One entitled to receive a remainder
interest in some estate sometime in the future.
515
rent
A fixed, periodic payment made by a tenant of a
property to the owner for possession and use, usually by
prior agreement of the parties.
516
rental schedule
A statement of proposed rental rates,
determined by the owner, or the property manager, or both,
based on a building’s estimated expenses, market supply and
demand, and the owner’s long-range goals for the property.
517
replacement cost
The construction cost at current
prices of a property that is not necessarily an exact duplicate
of the subject property but serves the same purpose or
function as the original.
518
reproduction cost
The construction cost at current
prices of an exact duplicate of the subject property.
519
rescission
The legal remedy of canceling, terminating,
or annulling a contract and restoring the parties to their
original positions. Contracts may be rescinded due to
mistake, fraud, or misrepresentation. There is no need to
show any money damage.
520
reserves
A portion of earnings set aside to cover
possible future losses.
521
reserves for replacement
An amount of money
budgeted for replacements of short-lived components of an
investment property, such as appliances.
522
Residential Rental Agreement Act
The state law
that mandates delivery of habitable residential rental units;
obligations of the landlord and the tenant are mutually
dependent. Provides tenant with rights and remedies such
as the Retaliatory Eviction Doctrine.
523
Resolution Trust Corporation
The organization
created by the Financial Institutions Reform, Recovery, and
Enforcement Act (FIRREA) to liquidate the assets of failed
savings and loan associations.
524
restrictive covenant
Private agreements usually
imposed by the owner when property is sold that limits
the way the real estate ownership may be used; frequently
used by owner/developer to maintain specific standards in
a subdivision. The covenants are appurtenant. Also called
protective covenants.
525
retainer fee
A small fee paid by the client upon
creation of a buyer agency relationship as an advance partial
compensation for services; it may be nonrefundable or
applied to final compensation due depending on the agency
agreement.
526
retaliatory eviction
Illegal eviction of a tenant that has
exercised protected rights under the law.
527
return on investment (ROI)
An annual percentage
derived from dividing cash invested into net after-tax
income.
528
reverse mortgage
A loan under which the homeowner
receives monthly payments based on the homeowner’s
accumulated equity rather than a lump sum. The loan
must be repaid at a prearranged date, upon the death of the
owner, or the sale of the property.
529
reversionary interest
A future estate that the grantor
holds while granting a life estate to another person.
530
ridge board
A heavy horizontal board, set on edge at
the apex of the roof, to which the rafters are attached.
531
right of first opportunity to purchase still valid
and process restarts.
The right of a
party to have the first opportunity to purchase or lease real
estate for a designated price, if the owner ever decides to sell
or lease; if the holder of the right does not opt to purchase,
the owner may sell to a third party within a specified time.
If sale to third party does not occur, the right is
532
right of first refusal
The right of a person to have
the first opportunity to either purchase or lease real
property, if the owner ever decides to sell or lease; no terms
are negotiated.
533
right-of-way
The right given by a landowner to another
to use the land as a pathway, without actually transferring
ownership.
534
riparian rights
An owner’s rights in land that borders
on or includes a stream, river, or lake. These rights include
access to and use of the water.
535
roofing felt
Sheets of flat or other close-woven, heavy
material placed on top of the roof boards to insulate and
waterproof the roof.
536
roofing shingle
Thin, small sheet of wood, asbestos,
fiberglass, slate, metal, clay, or other material used as the
outer covering for a roof. Shingles are laid in overlapping
rows to completely cover the roof surface. Shingles are
sometimes used as an outer covering for exterior walls.
537
rules and regulations
Real estate licensing authority
orders that govern licensees’ activities. They usually have the
same force and effect as statutory law.
538
R-value
The insulation value of materials. The higher the
R-value, the more resistant the material is to the transfer of
heat.
539
sales comparison approach
The process of estimating
the value of a property by examining and comparing actual
sales of comparable properties.
540
sandwich lease
The sublessor’s (original lessee’s)
interest in the real estate
541
satisfaction of mortgage
A document acknowledging
the full repayment of a mortgage debt.
542
scheduled gross income (SGI)
The amount of rental
income the property could produce with 100% occupancy
and all tenants paying full rent; also called potential gross
income.
543
secondary mortgage market
A market for the
purchase and sale of existing mortgages, designed to provide
greater liquidity for mortgages; also called the secondary
money market. Mortgages are first originated in the primary
mortgage market.
544
section
A portion of township under the rectangular
(government) survey system. A township is divided into 36
sections, numbered 1 through 36. A section is a square with
mile-long sides and an area of one square mile, or 640 acres.
545
security deposit
A payment by a tenant, held by
the landlord during the lease term and kept (wholly or
partially) on default or destruction of the premises by the
tenant.
546
self-dealing
Also known as a secret profit, an illegal act
by a licensee who takes advantage of clients by failing to
disclose the appropriate value of property.
547
self-help eviction
Illegal eviction practices used by
landlords instead of lawful use of summary ejectment.
548
Seller Closing Disclosure (SCD)
A type of settlement
statement that may be used in residential transactions that
are governed by TRID regulations.
549
servient tenement
Land on which an easement exists
in favor of an adjacent property (called the dominant
tenement); also called a servient estate or tract. Easement
runs with the land.
550
setback
The amount of space local zoning regulations
require between a lot line and a building line.
551
settlement
The process of adjusting and prorating
credits, debits, and closing expenses to conclude a real
estate transaction; referred to as closing.
552
settlement service provider
An individual or firm
that handles the facilitation of closings.
553
settlement statement
A form that summarizes the
flows of money owed by the seller and buyer (or credited to
the seller or buyer) at the closing of the transaction.
554
severalty
The ownership of real property by only one
person or entity; also called sole ownership.
555
severance
Changing an item of real estate to personal
property by detaching it from the land; for example, cutting
down a tree.
556
sharecropping
In an agricultural lease, the agreement
between the landowner and the tenant farmer to split the
crop or the profit from its sale, actually sharing the crop.
557
shared-appreciation mortgage (SAM)
A mortgage
loan in which the lender, in exchange for a loan with a
lower interest rate, participates in the profits (if any) the
borrower receives when the property is eventually sold.
558
sheathing
Insulating material that is applied to the wall
framing; siding is applied on top of the sheathing.
559
shingles
Exterior roofing material frequently made of
fiberglass, asphalt, or wood.
560
short sale
When a lender allows a borrower in default
on mortgage loan payments to sell the mortgaged property
for less money than necessary to satisfy the loan to avoid
the delay and expense of a foreclosure sale; lender usually
“forgives” the balance owed after the sale; although the IRS
will frequently consider the forgiven amount to be taxable
income for the borrower.
561
siding
Boards nailed horizontally to the vertical studs,
with or without intervening sheathing, to form the exposed
surface of the outside walls of the building. Siding may be
made of wood, metal, or masonry sheets.
562
sill
The lowest horizontal member of the house frame,
which rests atop the foundation wall and forms a base for
the studs. The term can also refer to the lowest horizontal
member in the frame for a window or door.
563
situs
The personal preference of people for one location
over another, not necessarily based on objective facts and
knowledge.
564
slab
A flat, horizontal reinforced concrete area, usually
the interior floor of a building but also an exterior or a roof
area.
565
soffit
The external underside of the eave; usually
contains ventilation for the attic and/or roof.
566
soil suitability test
An engineer’s test to determine
the ability of the ground to absorb and drain water; used
to determine suitability and location of septic system; also
called a percolation or perc test.
567
sole plate
The bottom of the wall frame that connects
the studs to the flooring.
568
special agent
One who is authorized by a principal
to perform a single act or transaction. A real estate broker
is usually a special agent of the seller authorized to find a
ready, willing, and able buyer for a particular property, or a
special agent of the buyer to find a specific type of property
to purchase. Special agent has limited authority and cannot
bind his principal.
569
special assessment
A tax or levy customarily imposed
against only those specific parcels of real estate that will
benefit from a proposed public improvement like a street or
sewer.
570
special warranty deed
A deed in which the grantor
only warrants, or guarantees, the title against defects arising
during the period of the grantor’s tenure and ownership
of the property and not against defects existing before that
time, generally using the language by, through, or under the
grantor but not otherwise.
571
specific lien
A lien affecting or attaching only to
a specific parcel of land or piece of real property; i.e.
mortgage lien.
572
specific performance
A legal action to compel a party
to carry out the terms of a contract.
573
split-level
Usually a house in which two or more floors
are located directly above one another, and one or more
additional floors, adjacent to them, are placed at a different
level; a tri-level.
574
spot zoning
Zoning that illegally singles out property
for either special or more restrictive treatment than is usual
under the area zoning ordinance.
575
square-foot method
The appraisal method of
estimating building costs by multiplying the number
of square feet in the improvements being appraised by
the cost per square foot for recently constructed similar
improvements.
576
statute of frauds
A state law that requires that certain
instruments that convey interest in real estate be in writing
to be legally enforceable, such as deeds, real estate sales
contracts, and certain leases.
577
statute of limitations
That law pertaining to the
period of time within which certain actions must be
brought to court or be lost.
578
statutory right of redemption
The right of a
defaulted property owner to recover the property after its
sale by paying the appropriate fees and charges.
579
steering
The illegal practice of channeling home seekers
to particular areas, either to maintain the homogeneity of
an area or to change the character of an area, which limits
their choices of where they can live.
580
stigmatized property
Property regarded as undesirable
because of events that occurred there; also called
psychologically impacted property. Some conditions that
typically stigmatize a property are murder, gang-related
activity, proximity to a nuclear plant, and even the alleged
presence of ghosts.
581
straight-line method
A method of calculating
depreciation for tax purposes, computed by dividing the
adjusted basis of a property by the estimated number of
years of remaining useful life.
582
straight-piping
An often illegal sewage disposal system
that transports raw or partially settled sewage directly to a
lake or stream, to a drainage system, or onto the ground.
583
stud
The vertical members in the wall framing; usually
placed 16–24 inches apart and serve as main support for
the roof and/or the story above.
584
subagent
One who is employed by a person already
acting as an agent; typically a reference to a provisional
broker licensed under a broker (agent) who is employed
under the terms of a listing agreement. A subagent has the
same duties to the client as the agent.
585
subdivision
A tract of land divided into two or more
parcels by the owner, known as the subdivider, for the
purpose of sale or development (either now or in the
future); all land division involving the dedication of a new
street or a change in an existing street.
586
subdivision and development ordinances
Municipal
ordinances that establish requirements for subdivisions and
development.
587
subflooring
Boards or plywood sheets nailed directly
to the floor joists, serving as a base for the finish flooring.
Subflooring is usually made of rough boards; although some
houses have concrete subflooring.
588
subjacent support
The support of the surface of land
by the land’s subsurface; duty of the owner of subsurface
rights to support the surface of the land.
589
sublease/sublet
The leasing of premises by a tenant
to a third party for part of the lessee’s remaining term. See
assignment.
590
subordination
Relegation to a lesser position, usually in
respect to a right or security.
591
subordination agreement
A written agreement
between holders of liens on a property that changes the
priority of mortgage, judgment, and other liens under
certain circumstances.
592
subprime loan
A loan made to a borrower with a credit
rating below what is required for regular loans creating
greater risk liability for the lender that is countered by
higher interest rates and fees; called B, C, or D paper.
593
subrogation clause
Any rights the insured had to
sue the person who caused the damage are assigned to the
insurance company that has already paid the insured for the
damages.
594
substitution
An appraisal principle that states that the
maximum value of a property tends to be set by the cost
of purchasing an equally desirable and valuable substitute
property, assuming that no costly delay is encountered in
making the substitution.
595
subsurface rights
Ownership rights in a parcel of real
estate to the water, minerals, gas, oil, and so forth that lie
beneath the surface of the property.
596
success fee
Compensation that is due and payable upon
the creation of a valid sales contract for property located by
the buyer’s agent.
597
suit to quiet title
A court action intended to establish
or settle the title to a particular property, especially when a
cloud on the title exists.
598
summary ejectment
Legal eviction procedure heard
before a magistrate for removal of a tenant that has
breached the lease terms.
599
supply
The amount of goods available in the market
to be sold at a given price. The term is often coupled with
demand.
600
supply and demand
The appraisal principle that
follows the interrelationship of the supply of and demand
for real estate. As appraising is based on economic concepts,
this principle recognizes that real property is subject to the
influences of the marketplace, as is any other commodity.
601
surety bond
An agreement by an insurance or a
bonding company to be responsible for certain possible
defaults, debts, or obligations contracted for by an insured
party; in essence, a policy insuring one’s personal or
financial integrity. In the real estate business, a surety bond
is generally used to ensure that a particular project will
be completed at a certain date or that a contract will be
performed as stated.
602
surface rights
Ownership rights in a parcel of real
estate that are limited to the surface of the property and
do not include the air above it (air rights) or the minerals
below the surface (subsurface rights).
603
survey
The process by which boundaries are
measured and land areas are determined; the on-site
measurement of lot lines, dimensions, and position of a
house on a lot, including the determination of any existing
encroachments or easements.
604
syndicate
A combination of people or firms formed
to accomplish a business venture of mutual interest by
pooling resources. In a real estate investment syndicate, the
parties own and/or develop property, with the main profit
generally arising from the sale of the property.
605
tacking
Adding or combining successive periods
of continuous occupation of real property by adverse
possessors. This concept enables someone who has not been
in possession for the entire statutory period to establish a
claim of adverse possession.
606
target housing
According to the EPA, housing built
before 1978 (with some exceptions).
607
taxation
The process by which a government or
municipal quasi-public body raises monies to fund
its operation.
608
tax credit
An amount by which tax owed is reduced
directly.
609
tax deed
An instrument, similar to a certificate of sale,
given to a purchaser at a tax sale. See certificate of sale.
610
tax lien
A statutory lien against real property for
nonpayment of taxes. Real and personal property tax liens
and assessments take priority over all other liens. Real
property tax and assessment liens are specific liens; personal
property tax liens are general liens.
611
tax sale
A court-ordered sale of real property to raise
money to cover delinquent taxes.
612
tenancy by the entirety
A concurrent form of
ownership reserved for property owned by spouses. Right
of survivorship is mandatory; making the surviving spouse
owner in severalty immediately upon the death of a spouse.
613
tenancy in common
A concurrent form of ownership
in which each owner holds an undivided interest in the real
property. Ownership interests can be unequal and the right
of survivorship is not allowed.
614
Tenant Security Deposit Act
The state act that
regulates the amount and use of money that can be required
as a security deposit and how the landlord holds that
deposit. The maximum amount of the deposit depends on
the term of the tenancy.
615
tenements
Any structures attached to the land.
616
term loan
A loan in which only interest is paid during
the term of the loan, with the entire principal due with the
final interest payment; also called a straight loan.
617
testate
Having made and left a valid will.
618
tier (township strip)
A strip of land six miles
wide, extending east and west and numbered north and
south according to its distance from the base line in the
government rectangular survey system of legal description.
619
TILA/RESPA Integrated Disclosure (TRID)
Rules
which integrate the Real Estate Settlement Procedures Act
(RESPA) and Truth in Lending Act (TILA) disclosures and
regulations. The rule describes the use of the Loan Estimate
and the Buyer Closing Disclosure, among other matters.
The TRID rules and forms took effect on October 3, 2015.
620
“time is of the essence”
A phrase in a contract that
requires the performance of a certain act no later than a
stated time or the noncompliant party is in breach and the
contract may be voidable by the opposite party.
621
time-share ownership
Any right to occupy a unit of
real property during five or more separated time periods
over a period of at least five years.
622
title (1)
The right to or ownership of land. (2) The
evidence of ownership of land.
623
title insurance
A policy insuring the owner and/or
mortgagee against loss by reason of defects in the title to a
parcel of real estate, other than encumbrances, defects, and
matters specifically excluded by the policy.
624
title search
The search of public records to determine
the current state of ownership of real estate; examining
chain of title.
625
title theory
Describing those states like North Carolina
that interpret a mortgage to mean that the lender is the
owner of mortgaged land who vests the legal title with
the trustee while borrower holds equitable title. Borrower
regains legal title upon full payment of the mortgage debt.
626
top plate
The top part of the wall framing that connects
the stud to the ceiling framing.
627
topographic survey
A survey that measures the
features of the earth’s surfaces such as hills and valleys plus
the location of roads.
628
Torrens system
A method of evidencing title by
registration with the proper public authority, generally
called the registrar, named for its founder, Sir Robert
Torrens.
629
tort
A wrongful act, injury, or violation of legal right to
the person or property of another.
630
Total Circumstances Test
A method used by judges to
determine whether an item is a fixture or personal property.
631
town house ownership
A hybrid form of ownership
where the owner holds fee title to their unit and the ground
beneath; horizontal ownership. Frequent use of party
walls; row houses. Common areas are usually owned and
maintained with other unit owners through a homeowners
association.
632
township
The principal unit of the rectangular
(government) survey system. A township is a square with
six-mile sides and an area of 36 square miles.
633
township lines
All the lines in a rectangular survey
system that run east and west, parallel to the base line, six
miles apart.
634
trade fixture
An article installed by a tenant under the
terms of a lease and removable by the tenant before the
lease expires.
635
transaction broker
The real estate licensee who assists
buyers and sellers in reaching an agreement in a real estate
transaction without representing interests of either party.
The licensee treats both parties equally as customers.
636
transfer tax
Tax stamps required to be affixed to a deed
by state or local law; excise tax, formerly known as revenue
stamps.
637
trust
A fiduciary arrangement whereby property is
conveyed to a person or an institution, called a trustee, to be
held and administered on behalf of another person, called
a beneficiary. The one who conveys the trust is called the
trustor.
638
trustee
The holder of bare, legal title in a deed of trust
loan transaction on behalf of a beneficiary.
639
trustee’s deed
A deed executed by a trustee conveying
land held in a trust.
640
trust funds
Those monies received on behalf of others
by a real estate licensee while acting as an agent in a real
estate transaction. Generally, trust funds include earnest
money deposits, down payments, tenant security deposits,
rents, and monies received from final settlements and must
be deposited into a trust account in accordance with North
Carolina Real Estate Commission Rules.
641
U.S. Department of Agriculture
An agency that offers
programs to help purchase or operate family farms as well
as provide loans to help purchase or improve single-family
homes in rural areas—generally areas with a population of
fewer than 10,000 that are not suburbs of urban areas.
642
underground storage tank (UST)
A tank and any
underground piping connected to the tank that has at least
10% of its combined volume underground; federal UST
regulations apply to only those storing either petroleum or
certain hazardous substances.
643
undisclosed dual agency
An illegal agency
relationship where buyers and/or sellers are unaware of an
individual broker or firm’s conflicting duties to their clients.
644
unenforceable contract
A contract that has all the
elements of a valid contract, yet neither party can sue the
other to force performance of it. For example, a verbal
contract is generally unenforceable.
645
Uniform Commercial Code
A codification of
commercial law, adopted in most states, that attempts to
make uniform all laws relating to commercial transactions,
including chattel mortgages and bulk transfers. When
chattels are purchased on credit, security interests are
created by an instrument known as a security agreement. To
give notice of the security interest, a financing statement
must be recorded. Article 6 of the code regulates bulk
transfers—the sale of a business as a whole, including all
fixtures, chattels, and merchandise.
646
Uniform Electronic Transactions Act (UETA)
North
Carolina version of the federal E-sign legislation that
validates electronic contracts, documents, and signatures.
647
unilateral contract
A one-sided contract wherein
one party makes a promise to induce a second party to
do something. The second party is not legally bound to
perform; however, if the second party does comply, the first
party is obligated to keep the promise.
648
unit-in-place method
The appraisal method of
estimating building costs by calculating the costs of all of
the physical components in the structure, with the cost of
each item including its proper installation, connection, et
cetera.; also called the segregated cost method.
649
universal agent
Person empowered to do anything the
principal could do personally; unlimited authority; unusual
in real estate.
650
urea-formaldehyde foam insulation (UFFI)
A
1970s foam insulation that released gases that can cause
respiratory problems such as skin irritations or asthma
attacks.
651
usury
Charging interest at a higher rate than the
maximum rate established by state law.
652
vacancy and collection losses
The amount of income
lost due to empty units or tenants not paying full rent.
653
vacancy rate
The percentage of the total space that is
unoccupied.
654
valid contract
A contract that complies with all the
essentials of a contract and is binding and enforceable on all
parties to it.
655
VA-guaranteed loan
A mortgage loan on approved
property made to a qualified veteran by an authorized
lender and guaranteed by the Department of Veterans
Affairs to limit the lender’s possible loss.
656
value
The power of a good or service to command other
goods in exchange for the present worth of future rights to
its income or amenities.
657
variance
Permission obtained from zoning authorities
to build a structure or conduct a use that is expressly
prohibited by the current zoning laws; an exemption from
ordinances due to unique hardship not created by the
property owner.
658
vendee
Vendee is a buyer, usually under the terms of a
land contract.
659
vendee
Vendor is a seller, usually in a land contract.
660
vicarious liability
Liability for the actions of another
party due to the legal relationship between them. Principals
and agents can be held responsible for the actions of
subagents.
661
voidable contract
A contract that seems to be valid on
the surface but may be rejected or disaffirmed by one or
both of the parties.
662
void contract
A contract that has no legal force or
effect because it does not meet the essential elements of a
contract.
663
voluntary lien
A lien placed on property with the
knowledge and consent of the property owner; such as a
mortgage lien.
664
walk-through inspection
The final inspection of the
property by the buyer prior to closing to assure that the
seller has vacated, made required repairs satisfactorily, and
delivered the property in the condition it was in at contract.
665
waste
An improper use or abuse of a property by a
possessor who holds less than fee ownership, such as a
tenant, life tenant, mortgagor, or vendee. Such waste
ordinarily impairs the value of the land or the interest of the
person holding the title or the reversionary rights.
666
water table
Natural water level whether it is above or
below ground level.
667
wetlands
Areas periodically inundated or saturated to
the extent that they can or do support vegetation adapted
to aquatic conditions.
668
will
A written document, properly witnessed, providing
for the transfer of title to property owned by the deceased.
669
willful misrepresentation
Intentionally misinforming
any party involved in a transaction about a material fact.
670
willful omission
Intentionally failing to disclose a
material fact to any party involved in a transaction.
671
Working with Real Estate Agents
A mandatory
agency information brochure that a licensee must give
to and review with consumers in all real estate sales
transactions no later than first substantial contact; it does
not create agency.
672
wraparound loan
A method of refinancing in which
the new mortgage is placed in a secondary, or subordinate,
position. The new mortgage includes both the unpaid
principal balance of the first mortgage and whatever
additional sums are advanced by the lender. In essence, it is
an additional mortgage in which another lender refinances a
borrower by lending an amount exceeding the existing first
mortgage amount without disturbing the existence of the
first mortgage.
673
writ of attachment
At the request of a creditor, the
court retains custody of the unsecured property during the
lawsuit to ensure that the property remains available to
satisfy a judgment ordered as resolution of the suit by the
court. A recorded writ is an encumbrance on the property.
674
writ of execution
A court order directing the county
sheriff to sell a defendant’s property as required by
judgment or court decree.
675
yield
The return on investment; amount of profit.
676
yield spread premium
A fee, usually expressed as
a percentage of the loan amount, paid by a lender to a
mortgage broker for making a loan at an above-market
interest rate with little or no origination fee. The lender will
receive an increased yield due to the higher interest rate,
thus allowing the compensation of the mortgage broker
without an origination fee.
677
zoning ordinance
An exercise of police power by a
municipality to regulate and control the character and use
of property. Zoning is local in nature.
