A type of blended mortgage loan which avoids
private mortgage insurance (PMI). It consists of an 80% - 30 year
first lien at market rates, a 10% - 15 year second lien at a slightly higher
interest rate, and a 10% down payment. Instead of having to come
up with a 20% down payment, a buyer is able to avoid PMI
with only 10% down. While the interest rate on the second note is
a bit higher, the total monthly payment is usually lower than a 90% mortgage
with PMI. In addition, the extra interest paid for the second lien
is tax deductable, whereas PMI is not. It is also possible to payoff
just the second lien, thereby lowering the future monthly payments.
Some lenders also offer 75-15-10 and 80-15-5 programs. This type
of mortgage also gives the consumer the option of having a non-escrowing
loan without a 20% downpayment.
abstract of title
A condensed version of the history of title
to a piece of land that lists any transfers in ownership, as well as any
liabilities attached to it, such as mortgages.
abutting
The joining, reaching, or touching of adjoining
land. Abutting pieces of land have a common boundary.
acceleration clause
A provision in a written mortgage, note, bond
or conditional sales contract that, in the event of default, the whole
amount of principal and interest may be declared to be due and payable
at once.
acceptance
An offeree’s consent to enter into a contract
and be bound by the terms of the offer.
accretion
An addition to land through natural causes.
acknowledgment
A declaration made by a person to a notary
public, or other public official authorized to take acknowledgments, that
the instrument was executed by him and that it was his free and voluntary
act.
acre
A measure of land equal to 43,560 square feet.
ad valorem
Designates an assessment of taxes against
property. Literally, according to value.
additional principal payment
A payment by a borrower of more than the scheduled
principal amount due in order to reduce the remaining balance on the loan.
adjustable
rate mortgage (ARM)
A mortgage loan whose interest rate fluctuates
according to the movements of an assigned index or a designated market
indicator--such as the weekly average of one-year U.S. Treasury Bills--over
the life of the loan. To avoid constant and drastic fluctuations, ARMs
typically limit how often and by how much the interest rate can vary.
adjusted basis
The original cost of a property plus the value
of any capital expenditures for improvements to the property minus any
depreciation taken.
Money that the buyer and sellers credit each
other at the time of closing. Often includes taxes and down payment.
administrator/administratrix
A man/woman appointed by a court to settle
the estate of a deceased person when there is no will. Contrast with executor/executrix.
adverse possession
The right of an occupant of land to acquire
title against the real owner, where possession has been actual, continuous,
hostile, visible, and distinct for the statutory period. The requirements
for adversely possessing property vary between states, but usually include
continuous and open use for a period of five or more years and paying taxes
on the property in question.
affidavit
Written statement signed and sworn to before
some person authorized to take an oath.
agency
The legal relationship between a principal
and
an agent. In real estate transactions, usually the seller is the principal,
and the broker is the agent: however, a buyer represented by a broker (i.e.,
buyer as principal is a growing trend. In an agency relationship, the principal
delegates to the agent the right to act on his or her behalf in business
transactions and to exercise some discretion while so acting. The agent
has a fiduciary relationship with the principal and owes to that principal
the duties of accounting, care, loyalty, and obedience. Also see buyer's
broker.
agent
A person authorized to act for and under the
direction of another person when dealing with third parties. The person
who appoints an agent is called the principal. An agent can enter into
binding agreements on the principal's behalf and may even create liability
for the principal if the agent causes harm while carrying out his or her
duties. See also attorney-in-fact.
alienation Clause
A clause in a mortgage, which gives the lender
the right to call the entire loan balance due if the property is sold;
due-on-sale clause.
amenities
Non monetary benefits and satisfactions derived
from property ownership, such as a pleasant view, pride in home ownership,
etc.
ammendment
A modification to an existing contract, mutually
agreed to by all parties. Examples might include a change in the
pruchase price due to a low appraisal, or a change in the closing date.
amortization
The operation of paying off indebtedness,
such as a mortgage, by installments. The conventional amortization periods
are15 or 30 years. (See term)
amortized mortgage
A mortgage requiring periodic payments
that include both interest and principal. Also see self
amortized loan.
annual membership
The amount that is charged annually for having
a line of credit available. Often charged regardless of whether or not
you use the line.
antitrust laws
Federal and state laws prohibiting, among
other things, monopolies, monopolistic practices, restraint of trade, and
price fixing.
application
An initial statement of personal and financial
information, which is required to approve your loan.
application fee
Fees that are paid upon application. Charges
for property appraisal and a credit report are usually included in the
application fee.
appraisal
A determination of the value of something,
such as a house, jewelry or stock. A professional appraiser--a qualified,
disinterested expert--makes an estimate by examining the property, and
looking at the initial purchase price and comparing it with recent sales
of similar property. Courts commonly order appraisals in probate, condemnation,
bankruptcy or foreclosure proceedings in order to determine the fair market
value of property. Banks and real estate companies use appraisals to ascertain
the worth of real estate for lending purposes. And insurance companies
require appraisals to determine the amount of damage done to covered property
before settling insurance claims.
appraised value
An estimate of the present worth.
appreciation
An increase in value or worth of property.
Opposite of depreciation.
asking (list) price
The price placed on property for sale.
assessor
A local government official who determines
the value of the property for taxation purposes.
assignee
A person to whom a property right is transferred.
For example, an assignee may take over a lease from a tenant who wants
to permanently move out before the lease expires. The assignee takes control
of the property and assumes all the legal rights and responsibilities of
the tenant, including payment of rent. However, the original tenant remains
legally responsible if the assignee fails to pay the rent.
assignment
A transfer of property rights from one person
to another, called the assignee.
assumable mortgage
An existing mortgage that can be taken over
by the buyer on the same terms given to the original borrower.
assumption of mortgage
The transfer of title to property to a grantee
wherein he assumes liability for payment of an existing note secured by
a mortgage against the property; should the mortgage be foreclosed and
the property sold for a lesser amount than that due, the grantee-purchaser
who has assumed and agreed to pay the debt secured by the mortgage is personally
liable for the deficiency. Before a seller may be relieved of liability
under the existing mortgage, the lender must accept the transfer of liability
for payment of the note. Also known as simple assumption. Contrast withsubject
to mortgage.
attachment
Method by which a debtor's property is placed
in the custody of the law and held as security pending outcome of a creditor's
suit.
attorney's opinion of title
An instrument written and signed by the attorney
who examines the abstracts of title, stating his opinion as to whether
a seller may convey good title.
attractive
nuisance
Something on a piece of property that attracts
children but also endangers their safety. For example, unfenced swimming
pools, open pits, farm equipment and abandoned refrigerators have all qualified
as attractive nuisances.
auction
A public sale of property to the highest bidder.
balloon mortgage
A mortgage where the final payment is considerably
larger than the preceding payments. Contrast with amortized
mortgage.
balloon payment
A large final payment due at the end of a
loan, typically a home or car loan, to pay off the amount your monthly
payments didn't cover. Many states prohibit balloon payments in loans for
goods or services that are primarily for personal, family or household
use, or require the lender to let you refinance the balloon payment before
forcing collection.
bill of sale
A written instrument given to pass title to
personal property.
blanket mortgage
One mortgage on a number of parcels of real
property.
blockbusting
The illegal practice of inducing panic selling
in a neighborhood by making representations of the entry, or prospective
entry, of members of a minority group; panic peddling.
See
Fair Housing.
bond
(1) A written agreement purchased from
a bonding company that guarantees a person will properly carry out a specific
act, such as managing funds, showing up in court, providing good title
to a piece of real estate or completing a construction project. If the
person who purchased the bond fails at his or her task, the bonding company
will pay the aggrieved party an amount up to the value of the bond.
(2) An interest-bearing document issued
by a government or company as evidence of a debt. A bond provides pre-determined
payments at a set date to the bond holder. Bonds may be "registered" bonds,
which provide payment to the bond holder whose name is recorded with the
issuer and appears on the bond certificate, or "bearer" bonds, which provide
payments to whomever holds the bond in-hand. Mortgage interest rates
are closely related to long term bond interest rates.
bonus
to selling agent (BTSA)
Compensation, above and beyond the sales commission,
offered to the real estate agent who brings the buyer to the transaction.
A BTSA is used to provide an extra incentive for real estate agents to
show a particular listing. Often the bonus is tied to closing within
a certain time period or the property selling for a certain price.
A buyer's agent should not consider the BTSA a factor in any negotiations
between buyer and seller. Realistically, most BTSA's tend to disappear
during initial negotiations, eventhough they should never be considered
as negotiable after they have been offered. Any bonus to selling
agent should be contained in a written agreement between the seller and
listing broker. The BTSA is technically offered by the listing broker,
not the seller, and thus should not be a subject of negotiation.
breach of contract
Failure, without legal excuse, of one of the
parties to a contract to perform according to the contract.
brokerage
For a commission or fee, bringing together
parties interested in buying, selling, exchanging, or leasing real property.
A line fixed at a certain distance from the
front and/or sides of a lot beyond which no structure can project. See
set
back.
bundle of rights
Ownership in real property implies a group
of rights, such as the right of occupancy, use and enjoyment, the right
to sell in whole or in part, the right to control the use, the right to
bequeath, the right to lease any or all of the rights, the right to the
benefits derived by occupancy and use of the property, etc.
buy down
A cash payment, usually measured in points,
to a lender in order to reduce the interest rate a borrower must pay.
buyer's broker
A licensee who has declared to represent only
the buyer in a transaction, regardless of whether compensation is paid
by the buyer or the listing broker through a commission split. Some brokers
conduct their business by representing buyers only.
calendar Year
A year using the actual number of days in
each month for a total of 365 days in a year (366 days in a leap year).
cap
The maximum allowable increase, for either
payment or interest rate, for a specified amount of time on an adjustable
rate mortgage.
capital gains
The profit on the sale of a capital asset,
such as stock or real estate. If you sell your primary residence, you can
exclude $250,000 in profit from capital gains tax. A couple can exclude
$500,000.
capitalization
The estimation of the value of income producing
property by dividing the annual net income by the capitalization
rate.
capitalization rate
The rate of expected return on investment
property. A ratio of income to value.
cash Out
Receiving money back when refinancing your
present mortgage. Not available on homestead property in Texas (See homestead).
The maximum allowable interest rate over the
life of the loan of an adjustable rate mortgage.
census
An official count of the number of people
living in a certain area, such as a district, city, county, state, or nation.
The United States Constitution requires the federal government to perform
a national census every ten years. The census includes information about
the respondents' sex, age, family, and social and economic status.
Certificate of Eligibility
The document given to qualified veterans which
entitles them to VA guaranteed loans for homes, business, and mobile homes.
Certificates of eligibility may be obtained by sending DD-214 (Separation
Paper) to the local VA office with VA form 1880 (request for Certificate
of Eligibility).
chain of title
A history of conveyances and encumbrances
of a property from some starting point, whereby the present owner derives
title.
channeling
The illegal practice of directing people to,
or away from, certain areas or neighborhoods because of minority status;
Steering. See Fair Housing.
A nonrefundable fee charged by a landlord
when a tenant moves in. The fee covers the cost of cleaning the rented
premises after you move out, even if you leave the place spotless. Cleaning
fees are illegal in some states and specifically allowed in others, but
most state laws are silent on the issue. Landlords in every state are allowed
to use the security deposit to clean a unit that is truly dirty.
clear title
A land title that doesn't have any liens (including
a mortgage) against it.
closing
The conclusion of the sales transaction when
the seller transfers title to the buyer in exchange for consideration.
In Texas, these proceedings are usually held at a title
company.
closing costs
Costs the buyer must pay at the time of the
closing in addition to the down payment which may include points, title
charges, credit report fee, document preparation fee, mortgage insurance
premium, inspections, appraisals, prepayments for property taxes, deed
recording fee, and homeowners insurance. Closing costs can vary considerably
from one financial institution to another.
closing statement
A detailed written summary of the financial
settlement of a real estate transaction, showing all charges and credits
made, and all cash received and paid out.
cloud on title
A claim or encumbrance that may effect title
to land.
Two or more tenants who rent the same property
under the same lease or rental agreement. Each co-tenant is 100%
responsible for carrying out the rental agreement, which includes paying
the entire rent if the other tenant skips town and paying for damage caused
by the other tenant.
collateral
Something of value deposited with a lender
as a pledge to secure repayment of a loan.
commingling
The illegal practice of combining or mixing
clients' funds with the agent's own funds.
commission
The compensation paid to a licensed real estate
broker or by the broker to the salesman for services rendered. Usually
a percentage of the selling price of the property.
Community Reinvestment Act
The federal law which requires federally regulated
lenders to describe the geographical market area they serve. Deposits from
that area are to be reinvested in that area whenever practical.
comparables
Properties which are similar to a particular
property and are used to compare and establish a value for that property.
compound interest
Interest which is computed on the principal
and any unpaid accumulated interest. Contrast with simple
interest.
condemnation
The act of taking private property for public
use, through due process under the right of eminent
domain, with compensation to the owner.
condominium
A form of real estate, usually a dwelling
with individual ownership of separate portions of the building plus shared
ownership of the common areas.
consideration
The price or subject matter, which induces
a contract; may be in money, commodity, exchange, or a transfer of personal
effort.
constructive
eviction
The provision of housing that is so substandard
that, for all intents and purposes, a landlord has evicted the tenant.
For example, the landlord may refuse to provide light, heat, water or other
essential services, destroy part of the premises or refuse to clean up
an environmental health hazard, such as lead paint dust. Because the premises
are unlivable, the tenant has the right to move out and stop paying rent
without incurring legal liability for breaking the lease. Usually, the
tenant must first bring the problem to the landlord's attention and allow
a reasonable amount of time for the landlord to make repairs.
Consumer
Credit Counseling Service (CCCS)
A national non-profit agency that, at no cost,
helps debtors plan budgets and repay their debts. One major criticism of
CCCS is that each office is primarily funded by voluntary donations from
the creditors that receive payments from debtors repaying their debts through
that office. The goal of CCCS is to insure that consumers repay the
debts that they owe. CCCS may arrange easy payment plans that increase
the chances for repayment, but harm a consumer's credit in the process.
Agreeing to a payment plan and following it to the letter may not stop
creditors from reporting delinquent repayment information to credit bureaus
for each month the payment falls short of the previous minimum amount.
contingency
A provision in a contract stating that some
or all of the terms of the contract will be altered or voided by the occurrence
of a specific event. A common example is a Buyer who enters
into the purchase of another home before his current home is sold.
The Buyer will usually ask for the Seller to make the sale contingent upon
the sale of the Buyer's current home. If the Seller receives another
offer for the property, the first Buyer must either agree to buy the home
without any contingency, or step aside and let someone else purchase the
home.
contract
A legally enforceable agreement to do, or
not to do, a particular thing for a consideration.
contract for deed
A contract for the sale of real estate where
the deed (title) of the property is transferred only after all the payments
have been made. Also known as a land contract, agreement of sale, conditional
sales contract, or installment contract. Buyers should be wary of
this type of contract, since they can lose their entire investment if the
owner declares brankruptcy, before the deed has been transferred.
contract for exchange of real estate
A contract for the sale of real estate in
which the consideration is paid wholly or partly in real property instead
of cash.
contract of sale
The agreement between the buyer and seller
on the purchase price, terms, and conditions necessary to both parties
to convey the title to the buyer.
conventional loan
A real estate loan, which is not insured by
the FHA or guaranteed by the VA.
conveyance
Written instrument, such as a deed or lease,
that evidences transfer of some ownership interest in real property from
one person to another.
cooperative
housing
(1) A form of real estate, usually
a dwelling in which residents own shares, but do not directly own
the space they inhabit. Rather, owning a share of the building entitles
the shareholder with the right to inhabit a certain space within the dwelling,
such as an apartment. Shares are usually proportional to the amount
of space in each apartment.
(2) A living arrangement in which residents
must perform certain duties or chores to benefit the entire residence,
in addition to paying room and board. A common form of dormitory living.
cooperative
sale
A sale of property in which the buyer is brought
to the transaction by a real estate agent who works for a different real
estate broker than the listing agent. Both brokers/companies have
agreed to cooperate in closing the property, and typically, splitting the
commission. Offers of cooperation and compensation are commonly found
in the MLS property listings.
The rejection of an offer to buy or sell that
simultaneously makes a different offer, changing the terms in some way.
For example, if a Buyer offers $160,000 for a home, and the Seller replies
that he wants $175,000, the Seller has rejected the Buyer's offer of $160,000
and made a counteroffer to sell at $175,000. The legal significance of
a counteroffer is that it completely voids the original offer, so that
if the Seller decided to sell for $160,000 the next day, the Buyer would
be under no legal obligation to pay that amount for the property.
covenant
A restriction on the use of real
estate that governs its use, such as a requirement that the property
will be used only for residential purposes. Covenants are found in deeds
or in documents that bind everyone who owns land in a particular development.
See Covenants, Conditions
& Restrictions.
covenants,
conditions & restrictions (CC&Rs)
The restrictions governing the use of real
estate, usually enforced by a homeowners'
association and passed on to the new owners of property. For
example, CC&Rs may tell you how big your house can be, how you must
landscape your yard or whether you can have pets. If property is subject
to CC&Rs, buyers must be notified before the sale takes place.
credit bureau
A private, profit-making company that collects
and sells information about a person's credit history. Typical clients
include banks, mortgage lenders and credit card companies that use the
information to screen applicants for loans and credit cards. There are
three major credit bureaus, Equifax, Experian and Trans
Union, and they are regulated by the federal Fair Credit Reporting
Act.
Insurance a lender offers or requires a borrower
to purchase to cover the loan. If the borrower dies or becomes disabled
before paying off the loan, the policy will pay off the remaining balance.
Federal and state consumer protection laws require the lender to disclose
to existing and potential borrowers the terms and costs of obtaining credit
insurance because it can affect the terms of the loan.
credit limit
The maximum amount that you can borrow under
a home equity plan.
credit report
An account of your credit history, prepared
by a credit bureau. A credit report will contain both credit history, such
as what you owe to whom and whether you make the payments on time, as well
as personal history, such as your former addresses, employment record and
lawsuits in which you have been involved. An estimated 50% of all credit
reports contain errors, such as accounts that don't belong to you, an incorrect
account status or information reported that is older than seven years (ten
years in the case of a bankruptcy).
credit score
In the mortgage lending world, credit scores
either make or break you when it comes to obtaining a home mortgage or
getting the best rate you can. There are three different scores available
to a mortgage lender each being generated by the three different credit
agencies. The most popular, known as a Fico score is from Experian (formally
TRW), then there is a Beacon score from Equifax, and finally a Emperica
score from Trans Union. This is the "mortgage scoring" system used to get
a conventional mortgage.
Simply, credit scores are numbers calculated
based upon your credit history. The better your credit, the higher your
number or score will be - the worse your credit, the lower the score. The
number of inquiries or times your credit has been pulled in the past 90
days will also lower your "score". In some instances, lack of credit results
in "no score" on your report requiring you to provide "alternative credit"
via your rental, utility or telephone payment histories. There's plenty
you can do to improve your score if you know how the system works. Just
don't expect much help from your lender--most consider the actual formulas
a trade secret and don't want people angling for an advantage. Congress
is currently working on legislation to provide consumers with access to
their credit scores and the formulas used to calculate these scores.
There are some lenders that do not rely on
credit scores to the degree that most do. Some times, credit reports contain
inaccuracies that lower your score, this is when a lender has to use a
common sense approach to approving your loan. In some instances you may
have to correct your credit report, wait for your score to improve, then
reapply for the loan. Talk with your mortgage broker or lender to understand
what your options are.
creditor
A person or entity (such as a bank) to whom
a debt is owed.
cul-de-sac
A dead end street which widens sufficiently
at the end to permit an automobile to make a "U" turn.
DBA
Doing Business As. Business names or aliases
filed with the county.
debenture
Bonds issued without security.
debt service
The total amount of credit card, auto, mortgage
or other debt upon which you must pay.
debt-service ratio
The measurement of debt payments to gross
household income which may include, in addition to the main wage earner's
salary, salaries of other wage earners, commissions, bonuses, overtime,
etc.
Deceptive Trade Practices Act
Part of the federal Consumer Protection Act
originally passed in 1973 and made specifically applicable to real estate
in 1975, specifically prohibiting a lengthy number of false, misleading
and deceptive acts or practices. The Texas Supreme Court has defined a
deceptive trade practice as one "which has the capacity to deceive an average,
ordinary person, even though that person may have been ignorant, unthinking,
or credulous." Also see
Texas
Deceptive Trade Practices - Consumer Protection Act.
deduction
In tax law, an amount that you can subtract
from the total amount on which you owe tax. Examples of federal income
tax deductions include mortgage interest, charitable contributions and
certain state taxes. For example, if Aimee receives an income of $60,000
in 1998 and pays $12,000 in mortgage interest during that same year, she
can deduct $12,000 when she fills out her federal tax return, leaving an
amount of $48,000 upon which she must pay tax.
deed
A written instrument by which title to land
is conveyed.
deed in lieu
(of foreclosure)
A means of escaping an overly burdenome mortgage.
If a homeowner can't make the mortgage payments and can't find a buyer
for the house, many lenders will accept ownership of the property in place
of the money owed on the mortgage.
Even if the lender won't agree to accept the property, the homeowner can
prepare a quitclaim deed that unilaterally transfers the homeowner's property
rights to the lender.
deed of trust
The legal instrument used in Texas in lieu
of a mortgage, in which the property is conveyed in trust to a trustee
to be held as security for a loan.
deed restrictions
Common name used in the Houston area to denote
covenants,
conditions & restrictions (CC&Rs). Deed restrictions
cover allowable land uses and home types and sizes within a neighborhood.
They are especially important within Houston, and unincorporated parts
of Harris County, since zoning does
not exist in these areas.
default
Non-performance of a duty arising under a
contract or otherwise.
defeasanse
A clause in a deed, lease, will or other legal
document that completely or partially negates the document if a certain
condition occurs or fails to occur. Defeasance also means the act of rendering
something null and void. For example, a will may provide that a gift of
property is defeasable--that is, it will be void--if the beneficiary fails
to marry before the willmaker's death.
delivery
The actual transfer of the deed, or an act
of a seller showing intent to make a deed effective, without which, there
is no transfer of title to the property.
depreciation
A loss in value.
descent
Acquisition of property through inheritance
laws when there is no will (when a person dies intestate).
devise
A transfer of real estate by will or last
testament.
disclosure
The making known of a fact that had previously
been hidden; a revelation. For example, in many states you must disclose
major physical defects in a house you are selling, such as a leaky roof
or potential flooding problem.
discount points (or points)
The amount paid either to maintain or lower
the interest rate charged. Each point is equal to one percent (1%) of the
loan amount (i.e., two points on a $100,000 mortgage would equal $2,000).
discount rate
(1) The rate charged member banks who
borrow from the Federal Reserve System.
(2) The rate used to convert future
income into present value.
dispossess
To oust from land by legal process.
dominant tenement
Property that carries a right to use a portion
of a neighboring property. For example, property that benefits from a beach
access trail across another property is the dominant tenement.
down payment
An amount of money the buyer pays which is
the difference between the purchase price and the mortgage amount.
dual agency
Representing the buyer and the seller in the
same transaction by the same agent. Since there is an inherent conflict
in fiduciary obligations to two different principals, dual agency, at best,
is a risky undertaking. TRELA requires that all parties to a dual agency
have full knowledge and consent (Disclosed Dual Agency). Contrast with
intermediary.
due on sale
A clause in a mortgage agreement providing
that, if the mortgagor (the borrower) sells, transfers, or, in some instances,
encumbers the property, the mortgagee (the lender) has the right to demand
the outstanding balance in full.
duress
Forcing action or inaction against a person's
will.
earnest money
A deposit made by the buyer as evidence of
good faith in offering to purchase real estate and to secure performance
of the contract. Earnest money is typically held by a title company, in
an escrow account, during the period between acceptance of the contract
and the closing.
earnest money contract (EMC)
A contract for the sale or purchase of real
estate in which the purchaser is required to tender earnest money to evidence
good faith in completing the contractual obligations. Almost every sales
contract for real estate in Texas will be an earnest money contract. Also
see sales contract and promulgated
contracts.
easement
A right to use another person's real estate
for a specific purpose. The most common type of easement is the right to
travel over another person's land, known as a right of way. In addition,
property owners commonly grant easements for the placement of utility poles,
utility trenches, water lines or sewer lines. The owner of property that
is subject to an easement is said to be "burdened" with the easement, because
he or she is not allowed to interfere with its use. For example, if the
deed to John's property permits Sue to travel across John's main road to
reach her own home, John cannot do anything to block the road. On the other
hand, Sue cannot do anything that exceeds the scope of her easement, such
as widening the roadway.
easement by prescription
A right to use property, acquired by a long
tradition of open and obvious use. For example, if hikers have been using
a trail through your backyard for ten years and you've never complained,
they probably have an easement by prescription through your yard to the
trail.
economic obsolescence
Loss of value of real property due to external
forces or events; eg., a sewer plant is built next door to the subject
property. Contrast with
Functional Obsolescence.
effective interest rate
The cost of credit on a yearly basis expressed
as a percentage. Includes up-front costs paid to obtain the loan, and is,
therefore, usually a higher amount than the interest rate stipulated in
the mortgage note. Useful in comparing loan programs with different rates
and points.
effluxion of time
The normal expiration of a lease due to the
passage of time, rather than due to a specific event that might cause the
lease to end, such as destruction of the building.
egress
An exit, or the act of exiting. The most famous
use of this word was by P.T. Barnum, who put up a large sign in his circus
tent saying "This Way to the Egress." Thinking an egress was some
type of exotic bird, people eagerly went though the passage and found themselves
outside the circus tent. Compare ingress.
emblements
Annual crops produced by cultivation. They
are deemed to be personal property.
eminent domain
The right of government to take private property
for public use, through court action known as condemnation.
The Fifth Amendment to the United States Constitution allows the government
to take private property if the taking is for a public use and the owner
is "justly compensated" (usually, paid fair market value) for his or her
loss. A public use is virtually anything that is sanctioned by a federal
or state legislative body, but such uses may include roads, parks, reservoirs,
schools, hospitals or other public buildings. Sometimes called expropriation.
enclave community
Smaller in scope than master-planned communities,
enclave communities typically blend different price ranges of residential
neighborhoods with amenities such as public recreation areas and parks,
neighborhood schools and extensive landscaping. Recreation areas
may include public swimming pools, tennis courts, and children's play grounds.
Many offer large water features and gated access.
encroachment
A fixture, or structure, such as a wall or
fence, which invades a portion of a property belonging to another.
Solutions range from paying the rightful property owner for the use of
the property to the court-ordered removal of the structure.
encumbrance
A cloud against clear, free title to the property
which does not prevent conveyance, such as unpaid taxes, easements, deed
restrictions, mortgage loans, etc.
endorsement
Writing one's name, either with or without
additional words, on a negotiable instrument, or on a paper attached to
it.
Equal Credit Opportunity Act
The 1974 federal law (Title VII of the Consumer
Credit Protection Act) which requires fairness and impartiality without
discrimination on the basis of race, color, religion, national origin,
sex or marital status, or receipt of income from public assistance programs
in the extension of credit, and good faith exercises of any right under
the Consumer Credit Protection Act (eg. the creditor must state reasons
for denial of credit).
Equal Treatment/Different Impact
It is possible to be guilty of discrimination
even by treating two individuals the same. If the results of the treatment
are discriminatory, or tend to exclude or otherwise harm members of a minority
group, or have discriminatory impact, they are against the law. For example,
an apartment house which rents only to doctors and lawyers, where there
are few, if any, minority doctors or lawyers in the area, may be a violation
of the
Fair Housing Laws.
equity
The difference in dollars between a house's
value and the mortgage amount.
escalator clause
The clause in a contract permitting adjustments
of the payments.
escheat
The reversion of property to the state in
the event the owner thereof dies without leaving a will (intestate)
and has no heirs to whom the property may pass by lawful descent.
escrow
A trust arrangement by which none or more
parties deposit things of value with an authorized escrow agent in accordance
with the terms of a real estate agreement.
escrow account
(1) A third party account that holds
money safely while a sale is in progress.
(2) An account used to save monies
required for the payment of an eventual debt. Often used by lenders
to save for property taxes, hazard insurance, homeowner's dues, etc.
Escrow accounts are typically non-interest
bearing for the contributors, but may pay interest to the entity holding
the account (lenders, title companies, lawyers, etc.).
estimate of value
An appraisal; the appraised value.
et ux
Abbreviation for "et uxor", meaning "and wife".
eviction
Removal of a tenant from rental property by
a law enforcement officer. First, the landlord must file and win an eviction
lawsuit, also known as an "unlawful detainer."
exception
As used in the conveyance of real estate,
an exception is the exclusion of some part of the property conveyed, with
title of that excepted part remaining with the grantor. For example, in
most subdivision developments, mineral rights are not conveyed to the purchaser
of a lot, but remain the property of the developer. Contrast with Reservation.
exclusive agency (EA)
A listing agreement which gives the listing
agent the right to sell the property for a specified time. The owner reserves
the right to sell the property himself without paying a commission to the
agent. Brokers run the risk of investing their time, effort, and money
in a listing that, even if sold through their marketing efforts, does not
produce a commission. Contrast with Exclusive Right to Sell.
exclusive right to sell (ERS)
A listing agreement which gives the listing
agent the right to sell the property for a specified time, with the right
to collect a commission if the property is sold by anyone, including the
owner, during the listing period. Contrast with Exclusive Agency.
exculpatory clause
A provision in a lease that absolves the landlord
from responsibility for all damages, injuries or losses occurring on the
property, including those caused by the landlord's actions. Most states
have laws that void exculpatory clauses in rental agreements, which means
that a court will not enforce them.
executor/executrix
The man/woman appointed in a will to carry
out the requests of the will. Contrast with Administrator/Administratrix.
Federal laws that prohibit housing discrimination
on the basis of race or color, national origin, religion, sex, familial
status or disability. The federal Acts apply to all aspects of the landlord/tenant
relationship, from refusing to rent to members of certain groups to providing
different services during tenancy.
Fair Housing Laws
Federal, state, and local laws, particularly
Title VIII of the 1968 Civil Rights Act, Title VI of the Civil Rights Act
of 1964, and the Civil Rights Act of 1866, which forbid discrimination
because of race, sex, color, religion, or national origin, in the selling
or renting of homes or apartments, and in other specified transactions.
These laws have been recently been expanded to include familial status
(having children) and disabilities (Americans with Disabilities Act).
Fannie Mae
Created by Congress in 1938 to bolster the
housing industry during the Depression, Fannie Mae was originally part
of the Federal Housing
Administration (FHA)and authorized to buy only FHA-insured
loans to replenish lenders' supply of money. In 1968, Fannie Mae became
a private company operating with private capital on a self-sustaining basis.
Its role was expanded to buy mortgages beyond traditional government loan
limits, reaching out to a broader cross-section of Americans.
Today, Fannie Mae operates under a congressional
charter that directs it to channel its efforts into increasing the availability
and affordability of homeownership for low-, moderate-, and middle-income
Americans. Fannie Mae receives no government funding or backing, and is
one of the nation's largest taxpayers as well as one of the most consistently
profitable corporations in America. Fannie Mae establishes strict
guidelines for mortgage loans it is willing to purchase. As the largest
buyer of mortgage loans in the US, these guidelines have become the industry
standard for the majority of home loans. Any loan that meets these
Fannie Mae guidelines is called a "conforming loan".
The Federal Deposit Insurance Corporation's
mission is to maintain the stability of and public confidence in the nation's
financial system. To achieve this goal, the FDIC has insured deposits and
promoted safe and sound banking practices since 1933. FDIC insurance
is offered at almost every US bank and savings and loan. In general, the
FDIC insures individual accounts in each financial institution for a maximum
of $100,000.00 per account. An individual or entity may only be insured
for a total of $100,000.00 for all the accounts held in any one institution,
or any of its branches.
Federal
Emergency Management Agency (FEMA)
FEMA is the governmental unit that has leadership
responsibilities for the Nation's emergency management system. Once the
President has declared a major disaster, FEMA coordinates not only its
own response activities but also those of as many as 28 other Federal agencies
that may participate. FEMA also works with States, territories, and
communities during non-disaster periods to help plan for disasters, develop
mitigation programs, and anticipate what will be needed when major disasters
occur. Among its many responsibilities the agency operates the Federal
Insurance Administration, which makes flood insurance available to residents
of communities that agree to adopt and enforce sound floodplain management
practices.
The Federal Housing Administration (FHA),
a wholly owned government corporation, was established under the National
Housing Act of 1934 to improve housing standards and conditions; to provide
an adequate home financing system through insurance of mortgages; and to
stabilize the mortgage market. FHA was consolidated into the newly established
Department
of Housing and Urban Development (HUD) in 1965. Since 1934,
FHA has been extremely successful in achieving these goals. FHA loans
require special a appraisal/inspection that determine if a property meet
the agency's minimum property standards. While somewhat more expensive
that a conventional loan in terms of interest rates and insurance fees,
FHA loans offer slightly more liberal qualifying criteria. The current
maximum FHA loan amount in the Houston area, for a single-family home,
is $139,650.00
fee simple estate
The most complete form of ownership of real
property; absolute ownership. Commonly used to to denote a property where
the owner has undivided title to the land on which the property is situated.
FHA
The Federal Housing Administration
which insures mortgage loans made by approved lenders, in accordance with
FHA regulations.
FHLMC
Acronym - Federal Home Loan Mortgage Corporation.
See Freddie Mac.
fiduciary
The relationship of trust, honesty and confidence
between agent and principal; the faithful relationship owed by an agent
to the principal.
finder's fee
A fee charged by real estate brokers and apartment-finding
services in exchange for locating a rental property. These fees are permitted
by law. Some landlords, however, charge finder's fees merely for renting
a place. This type of charge is not legitimate and, in some areas, is specifically
declared illegal.
first mortgage
A mortgage which is in first lien position,
taking priority over all other liens (which are financial encumbrances).
fixed rate mortgage
A mortgage with an interest rate and monthly
payment that doesn't vary for the term of the loan.
fixture
Personal property which has been attached
to real estate so as to become part of the real property. The article must
meet at least one of three conditions:
1. Attached in a permanent manner.
2. Specially adapted to the property. or
3. Intentionally made part of the real property.
Flood Control District
A special taxing district created to provide
flood control in specific areas of a county.
flood insurance
A special and separate type of homeowner's
insurance the provides coverage for damages resulting from flooding.
Flood insurance is required by most lenders only if the property is located
within a designated flood plain. The cost of the policy is related
to the associated flooding risk. If a property has a small section
of land located within a flood plain, but away from the residential improvements
(house), the lender will still require a policy, but its cost will be much
lower. Likewise, flood insurance policies for properties not located
within any floodplain, are fairly inexpensive.
Most flood insurance is underwritten by the
federal government through FEMA
and the National Flood Insurance Program in cooperation with private insurance
agencies. More than 18,000 communities participate in the Federal
flood insurance program. More than 3.8 million National Flood Insurance
Program (NFIP) home and business policies are in effect. The United
States experiences flooding threats throughout all four seasons of the
year and, in fact, flooding is the most common natural disaster. There
are, on average, 1000 floods per year in the U.S. Nearly everyone
is at some risk of experiencing the effects of flooding. In the Houston
area, 25 percent of flood-insurance claims come from areas outside a designated
flood plain.
flood plain
Flood plains are by definition subject to
periodic flooding. They are generally characterized by relatively flat
topography and soil types that were laid down during past inundations by
flood waters. If your property is in the 100-year flood plain, there
is a 1-in-100 chance in any given year that your property will flood. If
it is in the 25-year flood plain, there is a 1-in-25 chance in any given
year that your property will flood. The statistical chance of flooding
is not changed by any one flooding event; but repeated flooding may result
in the flood plain being recalculated.
A 100-year flood plain is always wider than
a 25-year flood plain, and the 25-year flood plain is contained within
the 100-year flood plain. The flood prone areas of the United States cover
approximately 150,000 square miles or 94 million acres of land, an area
roughly the size of the State of Montana. People living in flood plains
are 26 times more likely to experience a flooding disaster than they are
a fire disaster during the life of the 30-year mortgage on their homes.
The changes in flood plain maps reflect changes
in land use (such as increased building activity), changes in the waterways,
and flood control improvements (such as detention ponds or other flood
control measures). As more lots are covered with more buildings and
parking lots, the amount of water that flows into creeks and lakes increases
because there is less vegetation to absorb the water when it rains. This
is one reason why buildings that were not originally built in a flood plain
are now in the 25-year or 100-year flood plain.
FNMA
Usually referred to as "Fannie
Mae", the acronym stands for the Federal National Mortgage
Association.
For Sale
By Owner (FSBO)
An individual homeowner who is attempting
to sell his property without a real estate broker. The acronym, FSBO
is pronounced "fizzbo."
foreclosure
A legal process instituted by a mortgagee
or lien creditor after the debtor's default.
forfeiture
The loss of property or a privilege due to
breaking a law. For example, a landlord may forfeit his or her property
to the federal or state government if the landlord knows it is a drug-dealing
site but fails to stop the illegal activity. Likewise, a homeowner
may lose his house to satisfy IRS debts or if the government suspects the
home was bought with money derived from criminal acts. The government
may seize and sell the property at auction, often far below its fair market
value, before the homeowner has been allowed the due process of a trial.
If the homeowner is found not guilty, the government is only required to
pay back the amount received at auction, and not the market value.
fraud
A misstatement of a material fact made with
intent to deceive or made with reckless disregard of the truth, and which
actually does deceive.
Freddie Mac
Chartered by Congress in 1970, Freddie Mac
is a publicly held corporation that purchases mortgages in the secondary
mortgage market. Freddie Mac came into being as the Federal Home
Loan Mortgage Corporation (FHLMC) with the mission to create a continuous
flow of funds to mortgage lenders. By supplying lenders with the
money to make mortgages and packaging the mortgages into marketable securities
which are sold to investors, Freddie Mac also helps to sustain a stable
mortgage credit system which in turn, reduces the mortgage rates paid by
homebuyers. Over the years, Freddie Mac has been responsible for
opening the door to homeownership for one out of six home buyers in America
who would not have qualified otherwise.
front foot
One linear foot (12 inches) along the street
side of a lot.
Loss of value of real property caused by modernization
or changing tastes or standards; e.g.. single bath, inadequate closet space,
etc. Contrast with economic obsolescence.
A neighborhood or group of neighborhoods,
usually surrounded by masonary walls, restricting access through the use
of a manned guard station or electronically operated gates. The electronic
gates may be opened through the use of individual remote controls and/or
a numeric keypad and code. Some gated communities restrict entry
at all times, while others only limit access during the evening hours.
The City of Houston does not allow public city streets to be gated off,
so only neighborhoods with private streets, may have restricted access.
The costs associated with maintaining a manned guard gate can significantly
impact monthly maintenance fees, depending on the size of the community.
general lien
A lien that includes all the property owned
by a debtor, rather than a specific property. Contrast with Specific Lien.
general
warranty deed
A deed in which the grantor fully warrants
good and clear title to the property. A general warranty deed offers the
most protection of any deed.
Ginnie Mae
The common nickname for the Government National
Mortgage Association. Ginnie Mae was created in 1968 as a wholly
owned corporation within the Department of Housing and Urban Development
(HUD), having been separated from Fannie Mae. Ginnie Mae does not
loan money for mortgages. Instead, it operate in the secondary mortgage
market, buying loans and selling mortgage-backed securities investors,
which in turn, increases the availability of mortgage credit.
Acronym - Government National Mortgage Association,
also known as "Ginnie Mae"
good faith estimate
A written estimate of closing costs which
a lender must provide you within three days of submitting an application.
government survey method
A system of land description (not used in
Texas) which uses meridians (north and south lines) and base lines (east
and west lines). Areas include quadrangles (24 miles on each side), townships
(6 miles on each side), and sections (1 mile on each side). Also known
as the Rectangular Survey Method. Contrast with metes
and bounds, and recorded plat (Lot
and Block Number) method.
grace period
A period of time during which a loan payment
may be paid after its due date but not incur a late penalty. Such late
payments may be reported on your credit report.
grant deed
A deed containing an implied promise that
the person transfering the property actually owns the title and that it
is not encumbered in any way, except as described in the deed. This is
the most commonly used type of deed. Compare quitclaim
deed.
grantee
A person to whom real estate is conveyed;
the buyer.
grantor
A person conveying real estate by deed; the
seller.
gross debt service
The amount of money needed to pay principal,
interest and taxes, and sometimes energy costs. If the dwelling unit is
a condominium, all or a portion of common fees are excluded, depending
on what expenses are covered.
gross income
For qualifying purposes, the income of the
borrower before taxes or expenses are deducted.
gross lease
A commercial real estate lease in which the
tenant pays a fixed amount of rent per month or year, regardless of the
landlord's operating costs, such as maintenance, taxes and insurance. A
gross lease closely resembles the typical residential lease. The tenant
may agree to a "gross lease with stops," meaning that the tenant will pitch
in if the landlord's operating costs rise above a certain level.
In real estate lingo, the point when the tenant starts to contribute is
called the "stop level," because that’s where the landlord’s share of the
costs stops. Contrast with Net Lease.
habendum clause
The "to have and hold" clause which defines
or limits the quantity of the estate granted in the premises of the deed.
hazard insurance
A contract between purchaser and an insurer,
to compensate the insured for loss of property due to hazards (fire, hail
damage, etc.), for a premium. Most common, lender required feature
of homeowners insurance.
hereditaments
Property, personal and real, capable of being
inherited.
high-rise
A nine-story or taller building containing
residential apartments or condominium units. In addition to spectacular
views, most high-rises offer their residents a full range of amenities.
Building features may include 24-hour concierge service, swimming pools,
spas, saunas, tennis courts, exercise areas, party rooms and guest suites.
Security is enhanced at these buildings by the manned entry desks and limited
access, covered parking garages. Compare with mid-rise.
highest and best use
The particular use of a real property which
will produce the greatest financial return. The optimum use of a site as
used in appraisal. This is often determined by location, neighboring
properties, deed restrictions and local
zoning
regulations. A home built on a busy street, surrounded by commercial
property, and not restricted from other development, is not fulfilling
its highest and best use. Once the property is redeveloped into commercial
property, it can meet it economic potential.
In a contract, a promise by one party not
to hold the other party responsible if the other party carries out the
contract in a way that causes damage to the first party. For example, many
leases include a hold harmless clause in which the tenant agrees not to
sue the landlord if the tenant is injured due to the landlord’s failure
to maintain the premises. In most states, these clauses are illegal in
residential tenancies, but may be upheld in commercial settings.
home equity loan
A fixed or adjustable rate loan obtained for
a variety of purposes, secured by the equity in your home. Interest paid
is usually tax-deductible. Often used for home improvement or freeing of
equity for investment in other real estate or investment. Recommended by
many to replace or substitute for consumer loans whose interest is not
tax-deductible, such as auto or boat loans, credit card debt, medical debt,
and education loans. Home equity loans were recently made available
in Texas due to changes the homestead laws as of January 1, 1999.
home warranty
A service contract that covers a major housing
system--for example, plumbing or electrical wiring--for a set period of
time from the date a house is sold. The warranty guarantees repairs to
the covered system and is renewable. A basic, one year Buyer's warranty
costs $295 to $350 with additional coverage available for garage door openers,
spas, swimming pools, sprinkler system and other appliances.
homeowners'
association (HOA)
An organization comprising neighbors concerned
with managing the common areas of a subdivision or condominium complex.
These associations take on issues such as maintaining common land and recreation
areas, and collecting dues from residents. The homeowners' association
is also responsible for enforcing any covenants, conditions & restrictions
that apply to the property. Payment of dues and participation in
the homeowner's association may be either voluntary or mandatory, depending
on the neighborhood.
homeowners'
insurance
A type of insurance policy designed to protect
homeowners from financial losses related the ownership of real property.
In addition to covering losses due to vandalism, fire, hail, etc.(hazard
insurance), most policies also provide theft and liability
coverage. Flood related damage requires a separate flood insurance
policy or rider.
homestead
(1) The house in which a family lives,
plus any adjoining land and other buildings on that land.
(2) Land, and the improvements thereon,
designated by the owner as his homestead and, therefore, protected by state
law from forced sale by certain creditors of the owner. Texas offers
homestead protection for a single residential property. In addition,
Texas mandates a minimum $15,000 school district property tax exemption
on the appraised value of a homestead property. Other taxing authorities,
such as cities and counties, may offer additional property tax exemptions
on homesteads. Homestead protection will not stop foreclosures
for deliquent mortgages, taxes or
mandatory homeowner's association
dues.
(3) Land acquired out of the public
lands of the United States. The term "homesteaders" refers to people who
got their land by settling it and making it productive, rather than purchasing
it outright.
house closing
The final transfer of the ownership of a house
from the seller to the buyer, which occurs after both have met all the
terms of their contract and the deed has been recorded. Also known
as just "closing".
Housing
and Urban Development, Deparment of (HUD)
The U.S. Department of Housing and Urban Development.
This is the agency responsible for enforcing the federal Fair
Housing Act.
A legal doctrine that requires landlords to
offer and maintain livable premises for their tenants. If a landlord fails
to provide habitable housing, tenants in most states may legally withhold
rent or take other measures, including hiring someone to fix the problem
or moving out. See constructive
eviction.
improvements
Valuable additions to the land, such as buildings,
fences, roads, etc., which increase the value of the property.
incidents of ownership
Any control over property. If you give away
property but keep an incident of ownership--for example, you give away
an apartment building but retain the right to receive rent--then legally,
no gift has been made. This distinction can be important if you're making
large gifts to reduce your eventual estate tax.
In Texas, all but one of the state's school
districts are considered "Independent" since they do not fall under the
direct control of any other local government, and their boundaries are
not constrained by any city or county border lines. Each district
is run by an elected school board, which appoints a superintendent and
sets budgets and tax rates. Only the State of Texas has the authority
to regulate and oversee the actions of an Independent School District.
The one exception is the Stafford Municipal
School District, which de-annexed itself from the Fort Bend Independent
School District. Stafford MSD lies entirely within the city limits
of the City of Stafford, and shares its recreational and auditorium facilities.
index
A number, usually a percentage, upon which
future interest rates for adjustable rate mortgages are based.
ingress
An entrance, or the act of entering. Compare
egress.
inspection clause
A stipulation in an offer to purchase that
makes the sale contingent on the findings of a home inspector.
insurable title
A title which a title company will insure.
interest
(1) The sum paid in return for the
use of money; could be considered rent for the use of money.
(2) The type and extent of ownership
in property.
interest rate
The periodic charge, expressed as a percentage,
for use of credit.
intermediary
As of January 1, 1996, a broker may act as
an intermediary between the parties if the broker complies with the The
Texas Real Estate License Act. The broker must obtain the written consent
of each party to the transaction to act as an intermediary. The written
consent must state who will pay the broker and, in conspicuous bold or
underlined print, set forth the broker's obligations as an intermediary.
The broker is required to treat each party honestly and fairly and to comply
with The Texas Real Estate License Act. A broker who acts as an intermediary
in a transaction:
(1) shall treat all parties honestly;
(2) may not disclose that the owner
will accept a price less than than the asking price unless authorized in
writing to do so by the owner;
(3) may not disclose that the buyer
will pay a price greater than the price submitted in a written offer unless
authorized in writing to do so by the buyer; and
(4) may not disclose any confidential
information or any information that a party specifically instructs the
broker in writing not to disclose unless authorized in writing to disclose
the information or required to do so by The Texas Real Estate License act
or a court order or if the information materially relates to the condition
of the property.
With the parties' consent, a broker acting
as an intermediary between the parties may appoint a person who is licensed
under The Texas Real Estate License Act and associated with the broker
to communicate with and carry out instructions of one party and another
person who is licensed under the Act and associated with the broker to
communicate with and carry out instructions of the other party.
intestate
Legal designation of a person who has died
without leaving a valid will.
intimidation
As defined in the fair housing laws, it is
the illegal act of coercing, intimidating, threatening, or interfering
with a person in exercising or enjoying any right granted or protected
by federal, state or local fair housing laws.
invitee
A business guest, or someone who enters property
held open to members of the public, such as a visitor to a museum. Property
owners must protect invitees from dangers on the property. In an example
of the perversion of legalese, social guests that you invite into your
home are called "licensees."
joint tenancy
A way for two or more people to share ownership
of real estate or other property. When two or more people own property
as joint tenants and one owner dies, the other owners automatically own
the deceased owner's share. For example, if a parent and child own a house
as joint tenants and the parent dies, the child automatically becomes full
owner. Because of this right of survivorship, no will is required to transfer
the property; it goes directly to the surviving joint tenants without
the delay and costs of probate. Contrast with tenancy
in common.
judgment
The official and authentic decision of a court
of justice concerning the respective rights and claims of the parties to
an action or suit.
laches
Delay or negligence in asserting one's rights.
landlord
The owner of any real estate, such as a house,
apartment building or land, that is leased or rented to another person,
called the tenant.
latent defect
Hidden structural defects and flaws.
lease
An oral or written agreement (a contract)
between two people concerning the use by one of the property of the other.
A person can lease real estate
(such as an apartment or business property) or personal
property (such as a car or a boat). A lease should cover basic
issues such as when the lease will begin and end, the rent or other costs,
how payments should be made, and any restrictions on the use of the property.
The property owner is often called the "lessor,"
and the person using the property is called the "lessee."
In Texas, any lease over one year in length, must be in writing.
lease option
A contract in which an owner leases his house
(usually for one to five years) to a tenant for a specific monthly rent,
and which gives the tenant the right to buy the house at the end of the
lease period for a price established in advance. This allows a potential
home buyer move into a house he may wish to eventually buy without having
to come up with a down payment or financing at that time.
lease purchase
A contract in which an owner leases his house
(usually for one to five years) to a tenant for an increased monthly rent,
and which gives the tenant the right to buy the house at the end of the
lease period for a price established in advance, with the incremental rent
increase being used to form a down payment. Buyers should be wary
of this type of contract since they may lose their extra rent/down payment
money should the owner suffer financial setbacks before the purchase has
been completed.
leasehold estate
A form of real estate in which a tenant is
allowed to construct permanent structures upon a parcel of leased land,
and derive some use or income from said structures during the period of
the lease. Leasehold estates usually involve long-term leases, ranging
from 20 to 99 years. Land owners are able to have their property
developed, with no out of pocket expenses. Instead of having to sell
their land too soon, they retain their family's rights to the land, while
receiving a steady income stream. The tenant saves the initial land
acquisation costs and may gain access to property that would be otherwise
unavailable. The downside is, as the lease nears the end or its term,
the tenant's investment becomes uncertain, and the landlord is in a position
to make demands for compensation, above the fair market price. Leaseholds
are much more common in commercial real estate, but can apply to some residential
properties as well. Hawaii has many leasehold condominium projects,
and even Houston has at least one mid-rise condominium building that lacks
ownership of the land it occupies.
legal description
A description of a specific parcel of real
estate which is acceptable to the courts in that state, and which will
allows an independent surveyor to locate and identify it. Usually it uses
one of the following methods;
government
survey (Not Used in Texas),
metes
and bounds, or recorded plat
(lot and block number).
less favorable treatment
Any time a person is treated differently on
the basis of race, sex, religion, color, familial status, disability, or
national origin, either by action or inaction, in the selling or leasing
of real property, it is a violation of the Fair
Housing Laws. Also known as unequal treatment or different
treatment.
lessee
Tenant leasing property.
lessor
One who leases property to a tenant.
leverage
The use of borrowed funds to finance an investment
and to magnify the rate of return.
Levy
Improvement District (LID)
A type of Water Control and Improvement District,
used to build and maintain levies. Levies are used to contain flooding
creeks and rivers.
licensee
A person licensed by the Texas Real Estate
Commission to engage in real estate brokerage, either as a broker or as
a salesman.
A monetary claim against a property. These
should be settled before the sale is finalized.
lien theory state
Texas is a Lien Theory State, where legal
title of mortgaged property resides with the mortgagor (borrower), with
the mortgage as a lien against the property. Contrast with title
theory state.
life estate
An interest in property only for the duration
of someone's life.
life tenant
One who has a life estate in real property.
limited equity housing
An arrangement designed to encourage low-and
moderate-income families to purchase housing, in which the housing is offered
at an extremely favorable price with a low down payment. The catch is that
when the owner sells, she gets none of the profit if the market value of
the unit has gone up. Any profit returns to the organization that built
the home, which then resells the unit at an affordable price.
lis pendens
A notice indicating that legal action is pending
on a property.
listing agreement
The legal agreement between the listing agent/broker
and the vendor, setting out the services to be rendered, describing the
property for sale, and stating the terms of payment.
loan-to-value
ratio (LTV)
The ratio of the amount being loaned in respect
to the appraised value of the property, usually expressed as a percentage.
If a buyer was putting down $20,000, and borrowing a first lien of $180,000,
on a $200,000 property, then the loan would have a 90% LTV. Loan-to-value
ratios can effect interest rates, loan qualifying criteria, and lender
requirements for PMI
and escrow accounts.
lock or lock In
A commitment you obtain from a lender assuring
you a particular interest rate or feature or a definite time period. Provides
protection should interest rates rise between the time you apply for a
loan, acquire loan approval, and, subsequently, close the loan and receive
the funds you have borrowed.
loft
(1) A style of residential construction.
In Houston the term "loft" is used quite liberally. It may refer
to an older building that has been converted into residential condominiums,
or it may mean a new mid-rise project with a "loft-style" finish to the
units. There are also new construction townhomes that are promoted
as being "lofts". A builder creates new loft space by leaving exposed
brick walls, bare polished concrete floors and having unhidden heating
ducts, trusses, etc.
(2) An upstairs room or area that has
an open wall, overlooking a room or area below.
The State of Texas requires that its licensed
real estate brokers, and salesmen (who have met their SAE requirement),
attend at least 15 hours of certified real estate education courses before
each license renewal (every two years). At least six of the 15 hours
must be in legal topics.
manufactured home
A structure built in a factory, that is later
shipped to, and placed on, the homesite. The term can apply to both
mobile homes and pre-fab homes.
margin
An amount, usually a percentage, which is
added to the index to determine the interest rate for adjustable rate mortgages.
The price that a willing buyer and a willing
seller, both given full information, and neither under pressure to act,
would agree upon. Also known as Fair Market Value.
master-planned community
A large scale, mixed use, real estate development
that follows a long term, comprehensive plan. Master-planned communities
typically blend different price ranges of residential neighborhoods with
some commercial properties designed to serve the residents' needs.
Residential properties may include patio homes, townhouses, condominiums
and apartment complexes in addition to neighborhoods of single-family homes.
Likewise, multiple home builders are included in the construction of the
various neighborhoods. Commercial development can consist of retail
strip centers ans shopping malls, restaurants, entertainment venues and
office buildings.
In addition, master-planned communities usually
offer amenities such as public recreation areas and parks, neighborhood
schools and extensive landscaping. Recreation areas may include public
swimming pools, tennis courts, children's play grounds and sports fields.
Many offer large water features and public or private golf courses.
The term "master-planned" has become somewhat
of an overused buzzword in the current market place. True master-planned
communities require a a multi-year commitment from the developer and contain
thousands of homes.
A legal claim placed on real estate by someone
who is owed money for labor, services or supplies contributed to the property
for the purpose of improving it. Typical lien claimants are general contractors,
subcontractors and suppliers of building materials. A mechanics' lien claimant
can sue to have the real estate sold at auction and recover the debt from
the proceeds. Because property with a lien on it cannot be easily sold
until the lien is satisfied (paid off), owners have a great incentive to
pay their bills.
mediation
A dispute resolution method designed to help
warring parties resolve their own dispute without going to court. In mediation,
a neutral third party (the mediator) meets with the opposing sides to help
them find a mutually satisfactory solution. Unlike a judge in her courtroom
or an arbitrator conducting a binding arbitration, the mediator has no
power to impose a solution. No formal rules of evidence or procedure control
mediation; the mediator and the parties usually agree on their own informal
ways to proceed.
metes and bounds
A system of land description using distance
(metes) and angles/compass directions (bounds), beginning and ending at
the same point. Contrast with government
survey and recorded plat method.
mid-rise
A 4-story to 8-story tall building that contains
residential apartment or condominium units. While not offering the
panoramic views of a high-rise,
mid-rise buildings can offer comparable levels of amenities and services.
Building features may include 24-hour concierge service, swimming pools,
spas, saunas, tennis courts, exercise areas, and party rooms. Security
is enhanced at these buildings by the manned entry desks and limited access,
covered parking garages.
mineral rights
An ownership interest in the minerals contained
in a particular parcel of land, with or without ownership of the surface
of the land. The owner of mineral rights is usually entitled to either
take the minerals from the land himself or receive a royalty from the party
that actually extracts the minerals.
minimum payment
The minimum amount that you must pay, usually
monthly, on a home equity loan or line of credit. In some plans, the minimum
payment may be "interest only," (simple interest). In other plans, the
minimum payment may include principal and interest (amortized).
minority
As defined in the Civil Rights Act of 1968
as part of the Fair Housing Laws "'minority' means any group, or any member
of a group, that can be identified either: (1) by race, color, religion,
sex, disability, or national origin; or (2) by any other characteristic
(such as familial status) on the basis of which discrimination is prohibited
by a federal, state, or local fair housing law.
misrepresentation
A false statement, or concealment, of material
fact with the intention of inducing action of another.
mobile home
A type of manufactured home, that is transported
to the home site using wheels attached to the structure. Mobile homes
come in various widths and lengths, and maybe composed of one to three
pieces. A one piece home is called a "single-wide", while a house
that is joined together from two halves is called a "double-wide".
Recently, "triple-wides" have appeared, and become as the largest mobile
homes available. Most sections are between 14 and 16 feet wide, and
54 to 80 feet in length. Mobile homes do not require any foundation
or substructure. They sit up off the ground, with skirting used around
the base to hide the wheel and jacks. While it is possible to tie
down a mobile home to a piece of land, using straps and screw-in anchors,
the structures are very susceptible to high winds and tornados.
month-to-month tenancy
A rental agreement that provides for a one-month
tenancy that is automatically renewed each month unless either tenant or
landlord gives the other the proper amount of written notice (usually 30
days) to terminate the agreement. Some landlords prefer to use month-to-month
tenancies because it gives them the right to raise the rent after giving
proper notice. This type of rental also provides a landlord with an easy
way to get rid of troublesome tenants, because in most states month-to-month
tenancies can be terminated for any reason. It is also common for
leases to revert to month-to-month tenancies at the end of the original
lease period, if another lease has not been signed.
monument
A fixed object or point, either natural or
man-made, used in making a survey.
mortgage
A contract providing security for the repayment
of a loan, registered against property, with stated rights and remedies
in the event of default. Lenders consider both the property (security)
and financial worth of the borrower (covenant) in deciding on a mortgage
loan.
mortgage banker
Originates mortgage loans, loaning you their
funds and closing the loan in their name.
mortgage broker
A person or company having contacts with financial
institutions or individuals wishing to invest in mortgages.
mortgage loan
A loan which utilizes real estate as security
or collateral to provide for repayment should you default on the terms
of your loan. The mortgage or deed of trust
is your agreement to pledge your home or other real estate as security.
A system by which a number of real estate
firms share information about homes that are for sale. Membership
usually provides a monthly book and/or computer service that provides Realtors®
with detailed listings of most homes currently on the market.
Municipal
Utility District (MUD)
Municipal Utility Districts are authorized
under the Texas Constitution, Article III, Section 52, or Article XVI,
Section 59. They are local political subdivisions of the State, governed
by a board of directors. After the terrible floods in Texas during
1912-14, people across the state realized there was a real need to confirm
the State's duty to not only prevent floods but, also through the storage
of flood waters, to conserve the water for beneficial usages. This
was the genesis for the passage of Section 59 of Article XVI in 1917, which
allowed water districts to operate with unlimited bonded indebtedness.
In 1925, legislation was passed which authorized the creatio
