CANCELLATION CLAUSE a contract provision that gives the right to terminate
obligations upon the occurrence of specified conditions or events.
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CAI Community Associations Institute.
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CALIFORNIA BUNGALOW a 1-story, small, compact early twentieth-century house.
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CAP in adjustable rate mortgages, a limit placed on adjustments to protect the
borrower from large increases in the interest rate or the payment level.
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CAPACITY OF PARTIES one of the requirements for a valid contract. Parties with less
than full capacity include minors, the mentally insane, and those who are intoxicated.
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CAPE COD COLONIAL an early-American-style 1-story compact house that is small and
symmetrical with a central entrance. The roof is the steep gable type covered with
shingles. The authentic types have low central chimneys, but end chimneys are very common
in the new versions. Bedrooms on the first floor. The attic may be finished into
additional bed- rooms and a bath. A vine-covered picket fence is traditional to this type of home for sale.
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CALIFORNIA RANCH a post-World War II style, 1-story ground-hugging home with a
low, pitched roof.
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CALL PROVISIONS clauses in a loan that give the lender their right to accelerate
the debt upon the occurrence of a specific event or date.
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CAPITAL ASSET an asset defined in Section 1221 of the Internal Revenue Code that
once received favorable tax treatment upon sale. Excludes inventory, property held for
resale, property used in a trade or business, copyrights in certain instances, and certain
U.S. government obligations.
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CAPITAL CALLS additional money to be invested by equity owners to fund deficits in
construction costs or operating costs.
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CAPITAL EXPENDITURE an improvement (as distinguished from a repair) that will have
a life of more than one year. Capital expenditures are generally depreciated over their
useful life, as distinguished from repairs, which are subtracted from income of the
current year.
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CAPITAL GAIN gain on the sale of a capital asset In 1991 and thereafter, the
maximum individual tax rate on capital gains is 28%. There are limits on the deduction of
capital losses against ordinary income.
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CAPITAL IMPROVEMENT same as capital expenditure.
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CAPITAL LOSS loss from the sale of a capital asset.
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CAPITALIZATION 1. in finance, a process whereby anticipated future income is
converted to one lump sum capital value. A capitalization rate is divided into the
expected periodic income to derive a capital value for the expected income. Sum of
interest rate and recapture rate.
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CAPITALIZATION RATE a rate of return used to derive the capital value of an income
stream. The formula is Value = annual income capitalization rate
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CAPITALIZE 1. to estimate the present lump sum value of an income stream. 2. to set
up the cost of an asset on financial records.
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CAPITALIZED VALUE the value estimated by converting an income stream into a lump
sum amount.
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CAP RATE same as capitalization rate.
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CAPTURE RATE the sales or leasing rate of a real estate development compared to the
sales or leasing rate of all developments in the market area.
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CARRYING CHARGES expenses necessary for holding property, such as taxes and
interest on idle property or property under construction.
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CARRYOVER BASIS in a tax-deferred exchange, the adjusted tax basis of the property
surrendered that is used to determine the tax basis of the property acquired. See basis
(tax).
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CASH EQUIVALENT the conversion of the price of property that sold with either
favorable or unfavorable financing into the price the property would have sold for had the
seller accepted all cash in the transaction.
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CASH FLOW periodic amounts available to an equity investor after deducting all
periodic cash payments from rental income.
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CASH METHOD a method of accounting based on cash receipts and disbursements.
Contrast accrual method.
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CASH-ON-CASH same as equity dividend rate.
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CASH THROW-OFF same as cash flow.
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CAVEAT EMPTOR "let the buyer beware." The buyer must examine the goods or
property and buy at his own risk, except for latent defects.
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CBD central business district.
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CCIM Certified Commercial Investment Member, a professional designation of the
Realtors National Market Institute (RNMI).
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CD certificate of deposit.
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CENTRAL BUSINESS DISTRICT (CBD) the downtown section of a city, generally
consisting of retail, office, hotel, entertainment, and governmental land uses with some
high density housing.
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CERTIFICATE OF DEPOSIT (CD) a type of savings account and that carries a specified
minimum deposit and term and generally provides a higher yield than passbook-type savings
accounts.
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CERTIFICATE OF ELIGIBILITY issued by the Veterans Administration to those who
qualify for a VA loan.
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CERTIFICATE OF INSURANCE a document issued by an insurance company to verify the
coverage.
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CERTIFICATE OF NO DEFENSE same as estoppel certificate.
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CERTIFICATE OF OCCUPANCY a document issued by a local government to a developer
permitting the structure to be occupied by members of the public. Issuance of the
certificate generally indicates that the building is in compliance with public health and
building codes.
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CERTIFICATE OF REASONABLE VALUE a document issued by the Veteran's Administration,
based on an approved appraisal. Establishes a ceiling on the maximum VA mortgage loan
principal.
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CERTIFICATE OF TITLE an opinion rendered by an attorney as to the status of title
to a property, according to the public records.
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CERTIFIED COMMERCIAL INVESTMENT MEMBER (CCIM) a designation awarded by the Realtors
National Marketing Institute, which is affiliated with the National Association of
Realtors Address: Realtors National Marketing institute 430 North Michigan Avenue Chicago,
IL 6061 1
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CERTIFIED GENERAL APPRAISER one qualified to appraise any property, under the
appraiser certification law recently adopted by most states. Usually requires at least two
years of general appraisal experience, 150 hours of education, and passing a state
examination therefore allowing for appraisal of homes.
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CERTIFIED PROPERTY MANAGER (CPM) a professional awarded to real estate managers by
the Institute of designation Real- Estate Management, an affiliate of the National
Association of Realtors. Address: Institute of Real Estate Management 430 North Michigan
Avenue Chicago, IL 6061 1
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CERTIFIED RESIDENTAL APPRAISER one qualified to appraise residences and up to 4
units of homes, under appraiser certification law. Standards call for less education,
less experience, and less comprehensive exam than for General Certification.
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CERTIFIED RESIDENTIAL BROKER (CRB) a designation awarded by the Realtors National
Marketing Institute, which is affiliated with the National Association of Realtors.
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CERTIFIED RESIDENTIAL SPECIALIST (CRS) a professional designation awarded by the
Realtors National Marketing Institute, based on education and experience in residential
sales. Candidates must hold the GRI designation.
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CHAIN a linear unit of land measurement used in surveying: 66 feet in length. Each
chain consists of 100 links.
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CHAIN OF TITLE a history of conveyances and encumbrances affecting a title from the
time that the original patent was granted, or as far back as records are available. See
abstract of title, certificate of title.
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CHATTEL personal property. Anything owned and tangible, other than real estate.
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CHATTEL MORTGAGE a pledge of personal property as security for a debt. CLEAR
TITLE a marketable title; one free of clouds and disputed interests.
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CLIENT the one who engages a broker, lawyer, accountant, appraiser, etc.
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CLOSED-END MORTGAGE a mortgage loan whose principal amount cannot be increased
during the pay-out period; contrast with open-end mortgage.
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CLOSING 1. the act of transferring ownership of a property from seller to buyer in
accordance with a sales contract. 2. the time when a closing of a new home takes place.
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CLOSING COSTS various fees and expenses payable by the seller and buyer at the time
of a real estate or home closing (also termed transaction costs).
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CLOSING DATE the date on which the seller delivers the deed and the buyer pays for
the property.
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CLOSING STATEMENT an accounting of funds from a real estate sale, made to both the
seller and the buyer separately. Most states require the broker to furnish accurate
closing statements to all parties to the transaction.
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CLOUD ON THE TITLE an outstanding claim or encumbrance that, if valid, would affect
or impair the owner's title. Compare clear title.
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CLUSTER HOUSING a subdivision technique in which detached dwelling units are
grouped relatively close together, leaving open spaces as common areas.
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CODE OF ETHICS a statement of principles concerning the behavior of those who
subscribe to the code.
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COINSURANCE a clause in an insurance policy stating
the minimum percentage of value to be insured in order to collect the full amount of loss.
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COLD CANVASS the process of contacting homeowners in an area in order to solicit
listings.
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COLLAPSIBLE CORPORATION a term that applies to some corporations that are dissolved
within 3 years. The IRS treats gain on the sale or liquidation of the corporation as
ordinary income to the stockholder.
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COLLATERAL property pledged as security for a debt.
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COLLATERALIZED MORTGAGE OBLIGATION (CMO) a security backed by a pool of mortgage
loans that may be separated into various classes with varying maturities. Note that
REMICS, introduced by the Tax Reform Act of 1986, are the standard vehicle for investing
in mortgage instruments.
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COLOR OF TITLE that which appears to be good title but is not.
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COMMERCIAL BANK a financial institution authorized to provide a variety of
financial services, including consumer and business loans (generally short-term), checking
services, credit cards and savings accounts. Certain deposits at most commercial banks are
insured by the Federal Deposit Insurance Corporation. Commercial banks may be members of
the Federal Reserve System.
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COMMERCIAL BROKER one who lists and sells commercial property, which may include
shopping, office, industrial, and apartment projects. Contrast residential broker.
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COMMERCIAL PROPERTY property designed for use by retail, wholesale, office, hotel,
or service users.
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COMMINGLE to mingle or mix, such as the deposit of another's money in a broker's
personal account.
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COMMISSION 1. an amount earned by a real estate broker for his services. 2. the
official body that enforces real estate license laws.
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COMMISSIONER the head administrator of the State Real Estate Commission.
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COMMISSION SPLIT the arrangement of sharing commissions earned between a sales
agent and sponsoring broker, or between the selling broker and listing broker.
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COMMITMENT a pledge or promise; a firm agreement. Example: Collins obtains a
commitment from a savings and loan association for a $ 1 00,000 loan on a house she wants
to buy. She is then assured of the loan so business will proceed to closing.
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COMMITMENT FEE a charge required by a lender to lock in specific terms on a loan at
the time of application.
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COMMITMENT LETTER an official notification to a borrower from a lender indicating
that the borrower's loan application has been approved and stating the terms of the
prospective loan.
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COMMON AREAS areas of a property that are used by all owners or tenants.
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COMMON ELEMENTS in a condominium, those portions of the property not owned
individually by unit owners but in which an indivisible interest is held by all unit
owners. Generally includes the grounds, parking areas, recreational facilities, and
external structure of the building.
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COMMON LAW the body of law that has grown out of legal customs and practices that
developed in England. Common law prevails unless superseded by other law.
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COMMUNITY ASSOCIATION general name for any organization of property owners to
oversee some common interest. In a condominium or planned unit development, the
association has the responsibility of managing the common elements in the project. A
homeowners' association may be established in a subdivision to enforce deed covenants.
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COMMUNITY ASSOCIATIONS INSTITUTE (CAI) a nonprofit educational and research
organization concerned with the problems of managing homeowners' associations and other
community associations (such as condominium owners associations). CAI sponsors educational
seminars and publishes various handbooks and brochures. Address: Community Associations
Institute 1630 Duke Street Alexandria, VA 22314
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COMMUNITY PROPERTY property accumulated through joint efforts of husband and wife
and owned by them in equal shares. This doctrine of ownership now exists in Arizona,
California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington State.
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COMMUNITY REINVESTMENT ACT a federal law that requires federal regulators of
lending institutions to encourage lending within the local area of the institution,
particularly to low- and moderate-income residents and those residing in inner-city
neighborhoods.
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CO-MORTGAGOR one who signs a mortgage contract with another party or parties and is
thereby jointly obligated to repay the loan. Generally a co-mortgagor provides some
assistance in meeting the requirements of the loan and receives a share of ownership in
the encumbered property.
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COMPARABLES properties that are similar to the one being sold or appraised. See
market approach.
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COMPARATIVE SALES APPROACH same as market comparison approach.
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COMPARATIVE UNIT METHOD an appraisal technique to establish relevant units as a
guide to appraising the subject property-
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COMPARISON METHOD same as market comparison approach.
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COMPETENT PARTIES persons legally capable of entering a contract Must be of legal
age, not be insane or a drunkard.
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COMPLETION BOND a legal instrument used to guarantee the completion of a
development according to specifications. COMPOUND INTEREST interest paid on the original
principal and also on the unpaid interest that has accumulated.
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COMPRESSED BUY-DOWN a buy-down loan for which the
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COMPONENT DEPRECIATION dividing real estate improvements into various parts such as
the roof, plumbing, electrical system, and shell, then depreciating each component
separately for tax purposes.
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COMPOUND AMOUNT OF ONE PER PERIOD the amount that a series of deposits of $1.00 per
period would grow to if left on deposit with interest allowed to compound.
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COMPS appraisal term, short for comparables.
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CONCESSIONS benefits granted by a seller/lessor to induce a sale/lease.
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CONDEMNATION 1. taking private property for public use with compensation to the
owner under eminent domain. Used by governments to acquire land for streets, parks,
schools, etc., and by utilities to acquire necessary property. 2. declaring a structure
unfit for use. Example: The state health department, acting through its condemnation
powers, prevented use of an old, dilapidated shack because of violations of the housing
code.
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CONDITION(S) provision(s) in a contract that some or all terms of the contract will
be altered or cease to exist upon a certain event.
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CONDITIONAL COMMITMENT an agreement by a lender to provide a loan to a qualified
borrower, within a specified time period, but without stating who the borrower will be.
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CONDITIONAL OFFER purchase contract tendered to the seller that stipulates one or
more requirements to be satisfied before the purchaser is obligated to buy.
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CONDITIONAL SALES CONTRACT a contract for the sale of property or home stating that the
seller retains title until the conditions of the contract have been fulfilled.
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CONDOMINIUM a system of ownership of individual units in a multiunit structure,
combined with joint ownership of commonly used property (sidewalks, hallways, stairs,
etc.).
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CONDOMINIUM OWNERS ASSOCIATION an organization of all unit owners in a condominium
to oversee the common elements and enforce the bylaws.
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CONFORMING LOAN a mortgage loan that is eligible for purchase by FNMA or FHLMC.
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CONFORMITY PRINCIPLE an appraisal principle that holds that property tends to reach
maximum value when the neighborhood is reasonably homogeneous in social and economic
activity.
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CONSIDERATION anything of value given to induce entering into a contract; it may be
money, personal services, a product etc.
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CONSIGNMENT in real estate finance, the process in which the FSLIC replaces the
management of an insolvent savings and loan association, but allows the association to
continue operating. Example: Under the Southwest Plan, many savings and loan associations
in Texas were placed under a consignment program, in which experienced managers from other
S&Ls were recruited to run the associations under federal supervision.
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CONSTANT same as mortgage constant.
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CONSTANT ANNUAL PERCENT same as mortgage constant.
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CONSTANT PAYMENT LOAN a loan on which equal payments are made periodically so as to
pay off the debt when the last payment is made. See level payment mortgage, variable
payment plan.
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CONSTRUCTION LOAN one that finances subdivision costs and/or improvements to real
estate.
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CONSTRUCTIVE EVICTION the legal term describing a situation in which a lessor's
breach of a lease contract causes the lessee (tenant) to cancel the contract and vacate.
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CONSTRUCTIVE NOTICE the law presumes that everyone has knowledge of a fact when the
fact is a matter of public record.
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CONSTRUCTIVE RECEIPT 1. for tax purposes, the right to receive money that would be
taxable and is taxable, even if receipt is postponed. 2.in real estate exchanges, the
receipt of cash or other non-like-kind property or the acquisition of the right to use or
benefit from such cash or property during an exchange transaction.
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CONSUMER PRICE INDEX the most widely known of many such measures of price levels
and inflation that are reported to the U.S. government. It measures and compares, from
month to month, the total cost of a statistically determined "typical market
basket" of goods and services consumed by U.S. households.
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CONTIGUOUS actually touching; contiguous proper-ties have a common boundary.
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CONTRACT an agreement between competent parties to do or not to do certain things
for a consideration.
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CONTRACT FOR DEED same as land contract.
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CONTRACT OF SALE same as agreement of sale.
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CONTRACTOR one who contracts to supply specific goods or services, generally in
connection with development of a property.
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CONTRACT PRICE (TAX) in an installment sale, for tax purposes, generally the
selling price less existing mortgages assumed by the buyer.
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CONTRACT RATE same as face interest rate.
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CONTRACT RENT the amount of rent that has been set forth in a contract. Contrast
with economic rent
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CONTRIBUTION a principle of valuation that states that the value of any portion of
a property is determined by how it affects the performance of the total property.
Therefore, a property is considered a combination of features, each of which adds
something to the total value based on its contribution to the property's usefulness.
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CONVENTIONAL LOAN 1. a mortgage loan other than one guaranteed by the Veterans
Administration or insured by the Federal Housing Administration. 2. a fixed-rate,
fixed-term mortgage loan on a home.
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CONVERSION 1. changing property to a different use or form of ownership, such as
when apartments are transformed to condominiums. 2. the taking away of property that
belongs to another person. See also involuntary conversion. 3. a change in the ownership
form of a savings and loan association.
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CONVERTIBLE ARM an adjustable rate mortgage that offers the borrower the option to
convert payments to a fixed-rate schedule at a specified period within the term of the
loan. Conversion is made for a nominal fee, and the interest rate on the fixed-rate loan
is determined by a rule specified in the ARM loan agreement.
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CONVEY to deed or transfer title to another.
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CONVEYANCE the transfer of the title of real estate from one to another; the means
or medium by which title of real estate is transferred.
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CO-OP 1. an arrangement between 2 real estate agents that generally results in
splitting the commission between them. 2. a type of housing in which each tenant is a
shareholder in a omission.
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COOPERATING BROKER one who agrees to share the commission with another broker.
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COOPERATIVE a type of corporate ownership of real property whereby stockholders of
the corporation are entitled to use a certain dwelling unit or other units of space.
Special income tax laws allow the tenant stockholders to deduct interest and property
taxes paid by the corporation.
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CORPORATION a legal entity properly registered with the secretary of state. Can
have limited liability, perpetual life, freely transferable shares, and centralized
management.
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CORPOREAL visible or tangible real or personal property. Example: Buildings,
pavement, fences, and the like are corporeal Easements are incorporeal.
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COSIGNER same as accommodation party.
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COST APPROACH a method of appraising property based on the depreciated reproduction
or replacement cost (new) of improvements, plus the market value of the site.
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COST ESTIMATNG in construction, the act of predicting the total costs of labor,
materials, capital, and professional fees required to construct a proposed project.
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COST OF LIVING INDEX an indicator of the current price level for goods and services
related to some base year.
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COST-PLUS-PERCENTAGE CONTRACT an agreement on a construction project in which the
contractor is provided a specified percentage profit over and above the actual costs of
construction. These contracts are considered poor business practice because the contractor
has little incentive to hold down costs. A cost-plus-fixed-fee contract is a better
approach when building a new home.
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COTENANCY any of a number of forms of multiple ownership such as tenancy in common
and joint tenancy.
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COUNSELING the act of advising clients on a variety of real estate investment or
development matters.
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COUNSELOR OF REAL ESTATE (CRE) a member of the American Society of Real Estate
Counselors (ASREC). Membership is based on experience and professional conduct as a real
estate counselor.
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COUNTEROFFER rejection of an offer to buy or sell, with a simultaneous substitute
offer. Often seen when new home enters market.
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COVENANT NOT TO COMPETE a clause in an agreement where one party promises not to
offer to sell or produce the same goods and services in proximity to the other party.
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COVENANT RUNNING WITH THE LAND a covenant restricting or limiting property rights
to land, or a deed restriction, in which it is specified that ownership of the land cannot
be transferred unless the new owner agrees to continue to abide by the covenant.
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COVENANTS promises written into deeds and other instruments agreeing to performance
or nonperformance of certain acts, or requiring or preventing certain uses of the
property.
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CPM Certified Property Manager, a professional designation of the Institute of Real
Estate Management (IREM).
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CRAM DOWN in bankruptcy, the reduction of various classes of debt to a lower
amount, with acceptance by the bankruptcy court.
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CRB Certified Real Estate Brokerage Manager, a professional designation of the
Realtors National Marketing Institute (RNMI).
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CRE Counselor of Real Estate, or member of the American Society of Real Estate
Counselors (ASREC).
View Real Estate Listings
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CREATIVE FINANCING any financing arrangement other than a traditional mortgage from
a third-party lending institution. Often used when new home buyers don't qualify for regular mortgage.
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CREDIT 1. in finance, the availability of money. 2. in accounting, a liability or
equity entered on the right side of the ledger.
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CREDITOR one who is owed money.
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CREDIT RATING (REPORT) an evaluation of a person's capacity (or history) of debt
repayment. Generally available for individuals from a local retail credit association; for
businesses publicly held by companies such as Dunn & Bradstreet; and for - bonds by
Moody's, Standard & Poors, and Fitch's. individuals have access to their own files.
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CRS Certified Residential Specialist, a professional designation of the Realtors
National Marketing Institute (RNMI).
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CUL-DE-SAC a street with an intersection on one end and a closed turning area on
the other. often valued in the design of residential subdivisions for the privacy provided
to homes on the street.
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CURABLE DEPRECIATION depreciation or deterioration that can be corrected at a cost
less than the value that will be added.
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CURRENT YIELD a measurement of investment returns based on the percentage
relationship of annual cash income to the investment cost.
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CURTESY the right of a husband to all or part of his deceased wife's realty
regardless of the provisions of her will. Exists in only a few states.
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CUSTOM BUILDER one who builds unique new houses; contrast with tract house.
New Houses
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