B Lotz & Associates

Hayward Real Estate Glossary

All
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
X
W
Y
Z

A

Absorption
The absorption rate measures how many units of a specific type of real estate that have been purchased and occupied in a specific time period.
Accumulated cost recovery
The total amount of cost recovery deductions accumulated during a property's holding period.
Active income
Income from all taxable sources for any taxpayer.
Appraisal
An assessment of the value of a property.
Amortization
The reduction of a debt or liability through regularly scheduled payments, such as in a mortgage. The payments must be large enough to cover the principal as well as the interest.
Assignment of leases
The designation of rights under specific leases.
Attornment
A tenant's agreement and obligation to recognize a successor or replacement landlord in the event of a foreclosure or a similar enforcement of rights.

B

Bankruptcy-Remote
A company within a corporate group, the sole purpose of which is to be a borrower in a commercial loan. The purpose of this is to protect the rest of the corporate group from financial liability or bankruptcy.
Broker
An agent who negotiates sales or purchases on behalf of another person, in return for a fee or commission.
Brokerage
The commission or fee paid to a broker.
Business day
The period of time during which most businesses are operating. In most countries, this is between the hours of 9 AM and 5 PM, Monday through Friday.

C

Cognovit note
A confession of judgment given to a lender, in which the borrower agrees to pay a specified sum, in order to avoid the expense and time of litigation. It is essentially a forfeiture of the right of defense on the part of the borrower.
Closing
The final step of a real estate transaction, after offers and counteroffers have all been completed. This is when all deeds, mortgages, and leases are signed and delivered and when payments are made between parties and any agent fees are disbursed.
Collateral
Something of economic value, generally real estate, that a borrower offers to secure a loan. The collateral is subject to seizure by the lender if the borrower defaults on the loan.
Commission
The amount of money earned by a real estate professional for performing services.
Condition
A provision in a contract or other legal document in which a particular right is contingent upon the occurrence of another future event. If the future event does not occur, the condition can be ignored.
Contract
A formal agreement between two or more parties, usually one in which one party agrees to supply a good or service in return from payment from another party.
Credit score
A number based on a borrower's credit history that serves as a measure of that borrower's credit risk level. The credit score is used by lenders to determine whether the borrower is an acceptable risk. The score changes over time to reflect more recent credit history.

D

Deed of trust
A legal deed for a piece of real estate held by a trustee on behalf of a lender. If the borrower defaults on their debt to the lender, the trustee is empowered to sell the property and pay the proceeds of the sale to the lender in order to settle the debt. This is generally a much quicker process than a judicial foreclosure.
Default
A failure of a debtor to meet their legal obligations according to their contract with the lender. This can be either a failure to make scheduled payments or the violation of some other condition of the loan contract.
Defective title
A title to property that is irregular or deficient in some way.
Depreciation
The loss of value of a property over time. Either through wear and tear, other damage, or obsolescence.
Due on sale
The concept of having a loan immediately come due if the borrower sells a mortgaged property before the contractually agreed maturity date of the loan.

E

Earnest Money
A down payment made by a purchaser to demonstrate good faith before paying the entire purchasing price.
EBITDA
"Earnings Before Interest, Taxes, Depreciation and Amortization" a commonly used phrase in accounting in regards to measuring cash flow.
Egress
An owner's right to have a path to access their real estate.
Environmental indemnity
An agreement that protects a lender from any liability associated with existing or potential environmental violations on a piece of property which is security for a loan.
Equal Credit Opportunity Act (ECOA)
A United States law that forbids discrimination against any applicant for a credit transaction on the basis of race, color, religion, national origin, sex, marital status, or age. It also forbids creditors from asking about marital status except in situations where a spouse will have access to the credit line. Failure to comply with the ECOA can subject a financial institution to civil liability.
Equitable subordination
The concept of penalizing a senior lien holder for inequitable conduct by subordinating their priority so that other debt holders will have higher priority for collecting their debts.
Escrow account
An account held by a third party that is used for the purpose of receiving and disbursing money according to contractually determined conditions, as agreed upon by the borrower and lender. When the conditions are triggered, the funds needed to satisfy those conditions are paid out of the escrow account.
Escrow agent
A third party who manages an escrow account and ensures all funds are disbursed when they are required.
Estate
The total value of one's possessions, including property, debts, liabilities. Most often used in reference to the estate of a deceased or bankrupt person.
Estoppel
The concept of being prevented from contradicting already established facts, evidence, or arguments.
Estoppel certificate
A legally binding statement from one party to another, guaranteeing that the information included in the statement is reliable. The estoppel certificate is intended to prevent the first party from withholding facts or misleading the recipient.

F

Fee mortgage
A mortgage granted by the owner of a fee simple estate.
Fee simple estate
An absolute title to land, entitling the owner to do whatever they wish with the land.
FHA
Federal Housing Administration. The FHA is a government agency that insures residential mortgage loans.
FICO score
Fair Isaac Credit Organization. An organization that rates credit risk. "FICO" is commonly used as shorthand for their evaluation method of credit risk.
Financing statement
A form that gives notice of a creditor's interest in the personal property of a debtor.
Fixture
Property or equipment that is permanently affixed to real property so that it is considered an inseparable part of the property.
Foreclosure
The process of enforcing a mortgage, usually after a default, and performed through a judicial process. Sometimes referred to as "the power of sale."

G

Gross earnings
A person or corporation's total taxable income before any deductions are made.
Guaranty
A formal notification or assurance that one person or corporation is willing to assume responsibility for another's debts.

H

Hazard Insurance
Property insurance for real estate that indemnifies the owners against common sources of damage such as fire, accident, vandalism, and some other causes, depending on the details of the policy.
Homeowners association
A formal association of homeowners formed for the purpose of care and maintenance of commonly owned property, such as in a duplex, townhouse, or condominium.

I

Indemnification
Compensation for loss, damage, or expense incurred, commonly provided by an insurance company in return for regular payments.
Ingress
A means of entering a location, also, in real estate, the right to access property you own by right-of-way across adjoining land.
Intercreditor agreement
An agreement between multiple creditors of the same borrower, describing how commonly held collateral will be dealt with in the case of foreclosure and how debt repayment will be managed.
Intestate
An estate that has not been properly disposed of by a legal will; also a person who has not made a will.

J

Joint Tenancy
A property owned by two or more individuals with equal ownership and rights to the property. No owner can sell or transfer their rights in the property without the consent of all other owners. The right of survivorship provides that if any joint tenant dies, their portion of ownership is transferred to the surviving owners.
Junior financing
A loan which is lower in priority or secondary to a senior loan, such as a second mortgage when compared to a first mortgage.
Junior lien
A lien which is lower in priority to a senior lien, which occurs when property is used as collateral in multiple debts.

K

Key Tenant
The primary or a major tenant in a commercial property, generally one which leases a significant proportion of the property for their own use.

L

Lease
A formal agreement between a property owner and a tenant, granting the tenant rights to use or occupy the property for a specified period in return for a specified payment.
Leasehold estate
A temporary right to hold real estate for a fixed period of time (for example, a 99 year right to make use of a commercial building). The ownership of property automatically reverts to the lessor at the end of the leasing period.
Leasehold mortgage
A mortgage that uses a tenant's interest in a leasehold estate as collateral.
Lending regulations
Rules issued by governmental agencies which govern lending practices of banking institutions.
Lien
A legal claim in the property of another person to secure the payment of a debt or other obligation.
Loan Policy
Indemnifies lenders against potential losses caused by defects in titles of properties held as collateral.
Loan origination fee
A fee charged by a lender in order to process a new loan application.

M

Market Value
The value of a particular property on a "fair market", sometimes estimated by averaging the lowest price a seller would agree to and the highest price a buyer would agree to.
Metes And Bounds
A method of describing the boundaries of a piece of property or real estate through references to local geography, along with directions and distances.
Mezzanine loan
A loan secured by the ownership of equity interests of a borrower in a corporation or limited liability company rather than through a lien on property.
Mortgage
A loan secured by real property, usually used to purchase the property that is being used as security.
Mortgage broker
A third party who facilitates the relationship between lenders and borrowers for the purpose of establishing mortgages.
Mortgage insurance
An insurance policy that indemnifies a lender against potential loss from a borrower's default.

N

Neighborhood association
An organization of property owners within a particular area established to deal with various issues that affect all of the members and their individual property holdings.
Non-disturbance
The concept of a lender "not disturbing" the rights of tenants when their landlord defaults on their loan from the lender. For example, lenders may allow tenants to remain in property they are renting.
Non-recourse
The concept of lenders not being able to pursue recovery from the assets of a borrower that have not been specifically named as collateral.
Non-recourse carve-outs
Exceptions to non-recourse provisions, establishing conditions in which a lender may pursue a borrower's assets which are not being held as collateral.

O

Owner's Policy
Indemnifies property owners against potential losses caused by defects in titles of properties they own.

P

Participation agreement
A formal agreement that details the rights and obligations of multiple lenders who are jointly funding a loan.
Participation loan
A loan funded by two or more lenders, or a loan funded by one lender who then sells off pieces of the loan to another lender.
Perfection
The declaration of a lender's interest in secured property in order to make the lender's rights fully enforceable.
Personal property
Property not included in the real estate and fixtures.
Principal, Interest, Taxes, Insurance (PITI)
The four components of mortgage payment. This number is used against a borrower's monthly income to judge the feasibility of payment.
Power of sale
Linked to foreclosure, the power of sale allows the lender to sell the property in the event of a default of payment.
Pre-approval
This comes after pre-qualification. You will make an official application for a mortgage and the lender will perform an extensive check of your financial background and current credit rating. After which the lender will tell you the amount you have been approved for.
Pre-qualified
The initial step in the mortgage progress, a lender or bank will calculate the general mortgage amount you qualify for. This is done by evaluating your debt, income and assets.
Premium
The amount owed to secure an insurance policy.
Prepayment
Paying all or part of a loan before the registered due date.
Prepayment penalty or fee
If a borrower pays a portion or all of the principle of a loan before it is due then this fee or penalty compensates the lender for the lost interest.
Principal
(1) The amount of a loan which remains unpaid. (2) The part of a monthly payment which reduces the outstanding balance of a mortgage.
Probate
The legal process of verifying the validity of a will. It can also refer to the process of distributing assets if the deceased never created a will.

Q

Qualified Buyer
A buyer who has evidence that they are financially able to buy a home within a given price range.

R

Realtor
A title belonging solely to members to the National Association of Realtors.
Regulation B
A regulation under the Equal Credit Opportunity Act (ECOA) whereby a lender can be punished if it is proven they have refused a loan on grounds of age, gender, nationality, ethnicity or marital status.
Real Estate Settlement Procedures Act (RESPA)
An act created to protect potential homeowners by requiring lenders to disclose more information at certain stages of the loan settlement process.
Right Of Way
When a person or persons may travel through the property of another, usually because their property can only be accessed by said route.

S

Second Mortgage
A mortgage which has secondary priority in reference to the first mortgage.
Secondary financing
A second mortgage loan pertaining to property or other asset where a first mortgage is in place and the first mortgage takes precedence of payment over the second.
Security agreement
A legally binging document denoting what assets are designated as collateral to be taken and sold in the event of a default on the loan p[payments. Security interest
The collateral a lender has legal recourse to repossess if the borrower stops making loan payments.
Single purpose entity or special purpose entity or (SPE)
A legal entity (often a limited liability company) usually hired to protect other legal entities from financial risk.
Subprime mortgage
A mortgage given to borrowers with lower credit ratings. These mortgages have higher interest rates because the borrower is viewed as having a higher risk of defaulting on the loan.
Subordination
An agreement whereby an interest which is usually subordinate to another specific interest is made to supersede said interest.
Subordination, non-disturbance and attornment agreement (SNDA)
A document dictating the instances when the rights of a tenants supersede that of a lender and vice versa.

T

Tenant
(1) The person indicated as the property holder on a lease. 2) also used to specify a person who holds land by any form of title.
Third Party
In real estate this term refers to an individual or group which is not a the buyer seller, or a member of their team (agents lawyers, inspectors). For example a title company closing the deal is referred to as a third party.
Title insurance
Used to protect a property owner against losses caused by unrevealed defects which compromise the ownership rights of the property owner.
Title policy endorsement
When a title insurance company creates precise amendments or additions to the basic title policy as agreed upon by the company and the policy owner.

U

Underwriting
The procedure used by lenders to elect whether a debtor should be accepted for a loan.
Uniform commercial code or "UCC"
A law created by the National Conference of Commissioners on Uniform State Laws (NCCUSL), implemented in all fifty of the United States.

V

Vacancy Rate
The percentage of apartment/rooms which are unoccupied in an apartment complex/hotel.

W

Waiver
When an individual or group to knowingly renounce a right, claim, or privilege.
Walk-Through
The last inspection of the property before the sale is finalized. This is used so that the buyers can make certain that the seller has made the required repairs or bought appliances which were agreed upon.
Warranty
A binding agreement by the seller, encompassing the deed as well as the physical condition of the real estate.

X

X
Used by individuals who are unable to produce a signature for the purposes of legal documentation.

Y

Yield maintenance fee
If an individual with a prepayment plan does not prepay the loan then they are subject to a penalty whereby the lender is paid a fee to replace the unpaid interest rate.

Z

Zoning
The designation of a specified area unified under a specific set of regulations. Zoning affects the type of structure permitted, structural height, setbacks, density and use of land.