SAFE RATE A rate of return on investment that can be earned through relatively
risk-free investments.
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SALE AND LEASEBACK (SALE-LEASEBACK) A technique used by owners of property as a
means of raising capital. The process involves the simultaneous selling and leasing back
of the property, usually through a net lease. The advantages to the seller include the
freeing of capital previously tied up in the project and the inclusion of the rental
payment as a legitimate operating expense for income tax purposes. For the investor, the
rental payment represents a return on investment and any depreciation for tax purposes or
increases in value due to market conditions accrue to the investor.
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SALE OF PERSONAL RESIDENCE BY ELDERLY A provision in the federal income tax law
which allows for a forgiveness of $125,000 in capital- gains taxes for taxpayers 55 years
or older who sell their principal residence. To qualify, a taxpayer must be at least 55
years old on or before the date of the sale. The house must have been the principal
residence in at least three of the five years preceding the sale. If married, only one
spouse must be 55 years old, but both must join in making the election. If filing
separately, each spouse is only allowed half the exclusion or $62,500.
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SALES ASSOCIATE A licensed real estate salesperson or broker who is employed by and
works on behalf of a real estate broker.
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SALES COMPARISON APPROACH A means of estimating value by comparing recent sales of
comparable properties to the subject property after making appropriate adjustments for any
differences. Also known as the market (sales) approach, this method is effective in an
active market in which sales comparables can be identified and information collected. The
comparable properties selected should be substantially similar to the subject property and
should be arms-length transactions.
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SALES CONTRACT An agreement by which the buyer and seller agree to the terms and
conditions of a sale
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SALESPERSON A person licensed by a state real estate commission to perform on
behalf of any licensed real estate broker any act or acts authorized to be performed by
the broker. This is the person often carelessly or casually referred to as an agent.
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SALES PRICE The actual price agreed to by the purchaser and seller. Also referred
to as gross price, the sales price is generally more than the seller actually receives
since both the sales commission and all the seller’s closing costs are subtracted
before determining the net sales price realized by the seller.
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SALVAGE VALUE The expected worth of a piece of property at the end of its economic
life.
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SANDWICH LEASE A lease agreement created when a lessee (tenant) sublets the
property to another person, thus creating a sublessor-sublessee relationship. The person
in the "sandwich" is a lessee to one party and a lessor to another party.
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SATELLITE TENANT A smaller tenant in a shopping mall. Such tenants are dependent
upon the larger and better-known tenants to attract customers to the mall. Examples of
satellite tenants include cigar stores, candy stores, and specialty apparel stores.
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SATISFACTION OF MORTGAGE A written release issued by a mortgagee (lender) stating
that a mortgage has been paid in full.
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SAVINGS AND LOAN ASSOCIATION (S&L) A supplier of mortgages, lending primarily
on single-family residential real estate. While savings and loan associations (S&Ls)
are not the largest financial intermediary in terms of total assets, historically they
have been an important source of funds in terms of the dollars made available for
financing real estate.
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SAVINGS ASSOCIATION INSURANCE FUND (SAIF) The fund operated through the Federal
Deposit Insurance Corporation (FDIC) which insures deposits of savings and loan
associations. SAIF was created as part of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 and replaced the Federal Savings and Loan Insurance Corporation
(FSLIC).
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SCARCITY An economic principle which when used to explain real estate markets
states that while there is no physical shortage of land in the United States, there are
occasional shortages of economically useful land at particular locations.
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SCENIC EASEMENT An easement created for the purpose of preserving a certain view or
to prevent any construction on a particular site so as to preserve the land in its natural
state.
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SEAL An impression in wax or paper to signify the formality of the execution of a
legal instrument. In earlier times the signature of a grantor had to be under seal,
particularly in times when many people were unable to sign their own name. Today, however,
many states recognize the initials L.S., which means 'in place of the seal;' or the word,
"seal,' as a substitute. Other states have no requirement for a seal unless a
corporation is the grantor.
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SEASONED MORTGAGE A loan made a number of years ago and in which the borrower has
been timely and consistent in payment of the mortgage.
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SECOND A quantitative measurement used in the metes and bounds legal description
method represented by the symbol "'. An angle N 30' 10' 5" E would be read as
"North thirty degrees, ten minutes, 5 seconds Fast."
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SECONDARY FINANCING A loan secured by a junior mortgage on property.
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SECONDARY MORTGAGE MARKET The means by which existing first mortgages are bought
and sold. The secondary mortgage market provides a lender with an opportunity to sell a
loan before its maturity date. The availability of funds for financing real estate is
affected by economic conditions both local and national.
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SECONDARY MORTGAGE MARKET ENHANCEMENT ACT OF 1984 Federal legislation that enhanced
the development of the private mortgage securities markets, amended federal securities
laws and preempted certain state laws.
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SECOND MORTGAGE A mortgage that is second in priority because of the time of
recording the mortgage or of the subordination of the mortgage.
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SECTION A quantitative measurement of land used in the Government Survey Method
equal to one mile square, containing 640 acres. There are 36 sections in a township.
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SECURITY DEPOSIT A sum of money held by a landlord from a tenant for the purpose of
securing the performance of the terms of the lease by the tenant for such things as the
payment of rent and repair of damages caused by the tenant.
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SEE-THROUGH BUILDING A building characterized by a high vacancy rate, perhaps 100
percent, and thus, you can "see" through it.
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SEISIN (SEIZIN) Possession of land by someone holding a freehold estate in the
land.
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SELF-AMORTIZING MORTGAGE LOAN A mortgage loan that requires level annual payments
adequate to meet interest requirements and fully repay the principal over its term.
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SELLER FINANCING A loan made by the owner of property to the purchaser to cover
part or all of the sales price. While common with both residential and commercial real
estate, seller financing, or owner financing as it is also called, becomes a very popular
means of "making the deal work" when interest rates are high. During such times,
the purchaser who is unable to qualify for a loan from a traditional lender often turns to
the seller and makes an offer to purchase contingent upon seller financing.
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SELLER'S MARKET An economic situation in which demand is greater than supply. The
result is greater opportunities for owners who may find someone willing to offer the
asking price or even a figure greater than the asking price. During times of high demand,
particularly in local markets, stories appear regarding the owner who had "five
offers above the asking price' before the property was put on the market. In contrast, a
buyer's market refers to a situation in which demand is less than supply at which time the
advantages shift to the buyer.
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SELLING AGENT A real estate licensee who finds the purchaser in a transaction even
though the agent did not actually list the property for sale. The majority of residential
listings, particularly in metropolitan areas, become part of a multiple listing service
(MLS) which establishes a working and legal relationship between the licensee who listed
the property and all other members of the MLS. By selling the property, the selling agent
is entitled to a certain agreed-to percentage, normally 50 percent, of the real estate
commission.
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SEMENOW, ROBERT W. Author of Questions and Answers on Real Estate, a comprehensive
sourcebook for answering problems encountered in the real estate brokerage business.
Semenow served for many years as the executive vice- president of the National Association
of Real Estate License Law Officials (NARELLO).
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SEMIANNUAL T\vice a year at six-month intervals.
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SEMIDETACHED HOUSING A dwelling whereby one of the outside walls is shared with an
adjoining unit of similar style and size.
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SENIOR REAL ESTATE ANALYST (SREA) A professional real estate designation awarded by
the Society of Real Estate Appraisers to persons who have met minimum education and
experience requirements related to real estate value and investment analysis.
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SENIOR REAL PROPERTY APPRAISER (SRPA) A professional real estate designation
awarded by the Society of Real Estate Appraisers to persons who have met minimum education
and experience requirements related to the valuation and appraisal of income-producing
property.
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SENIOR RESIDENTIAL APPRAISER (SRA) A professional real estate designation awarded
by the Appraisal Institute to persons who have met minimum education and experience
requirements related to the valuation and appraisal of residential property.
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SEPARATE PROPERTY Property individually owned by either husband or wife during the
time of marriage, as opposed to property jointly owned by husband and wife.
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SERVICING FEE The periodic (monthly or annual) payment made by the purchaser of a
mortgage to the mortgage banker who originally made the loan for servicing the loan. The
fee, which varies from one-fourth to one-half percent of the outstanding loan balance,
covers the administrative costs of servicing such as collection and payment of property
taxes and property insurance premiums.
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SERVICING (THE LOAN) The periodic, normally monthly, collection of mortgage
interest and principal repayment and other mortgage- related expenses, such as property
taxes and property insurance.
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SERVIENT ESTATE The property or parcel of land which is burdened by an easement.
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SETBACK REQUIREMENT(S) The distance, normally measured in feet, back from the
street or property line upon which no permanent improvements such as a building can be
met. Setback requirements may be publicly imposed through zoning ordinances or privately
imposed through deed restrictions or covenants.
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SETTLEMENT The closing of a real estate transaction at which time prorations and
adjustments are made between buyer and seller for the purpose of concluding the
transactions.
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SETTLEMENT BOOK A booklet given by a lender to an applicant for a residential loan
entitled Settlement Costs and You. The book describes the settlement procedures, the
various services the buyer needs, and information on the borrower's rights under the Real
Estate Settlement Procedures Act.
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SEVERALTY Individual ownership of real estate. The word severalty or several in
property law means separate or severed. It should not be confused with the normal usage of
the word "several" which means many. Owning land in severalty means owning an
estate or other interest in the land by separate or individual right. An individual who is
the sole owner of property has exclusive right to the estate without sharing the ownership
of the estate with another. The person who owns the estate in severalty is the only one
required to sign a deed to convey title, unless an additional signature is required to
release some courtesy, dower, or homestead right which might be recognized in a particular
state. It is also possible, however, for an estate to be owned in some type of concurrent
or multiple ownership.
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SEVERANCE Action that results in the removal or separation of something from the
land. For example, the cutting of trees results in those trees being severed from the
land.
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SEVERANCE DAMAGE The loss in value to the remaining tract or parcel of land
resulting from a partial taking of land through the power of eminent domain.
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SHAKEOUT The activities taking place in a real estate market during bad financial
times. Since real estate markets are unique, one segment of the market, (for example,
office buildings) may be going through tough times while another segment, such as
single-family residential, is in the midst of a boom period. The shake-out often results
in marginal projects going under as well as poorly-financed developers and builders
leaving the market.
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SHARED APPRECIATION MORTGAGE (SAM) A mortgage in which the lender shares in the
appreciation or increased value of the real estate. Under such an agreement, the lender
receives a part of the gain realized from a sale of the property and in exchange the
lender typically reduces the interest rate on the loan. In the event the property is not
sold by a predetermined date, a provision is normally included in the mortgage which
provides for an independent appraisal of the property by a third party. The value
estimated by the appraisal is then used to determine the amount of gain due the lender by
the borrower.
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SHELL LEASE A type of lease arrangement under which the lessee (tenant) rents the
shell of a building and agrees to make the necessary interior improvements such as wiring
and plumbing, walls, painting, and carpeting.
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SHERIFF'S DEED A deed given to a buyer when property is sold through court action
in order to satisfy a judgment for money or for foreclosure of a mortgage.
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SHERIFF'S SALE A forced sale of property, the proceeds of which are used to satisfy
the unpaid claims of the debtor. The legal conveyance of any property sold during the sale
will be done by a sheriffs deed.
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SHOPPING CENTER A type of retail space consisting of various stores and normally
located on enough land to provide off-street parking.
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SHORT RATES An insurance concept relating to the fact that the insured party under
an insurance policy has the right to cancel a policy at any time. Written or oral notice
must be received by the insurance company, and any unused part of the premium is refunded.
However, the refund is normally less than the straight pro rata charge since upon
cancellation insurance companies calculate the used portion based on short rates. Short
rates are higher than pro rata charges and thus the percentage refunded is not the same as
the percentage of the unused term of the coverage.
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SILENT PARTNER A participant in a partnership whose name is unknown to the public
but who nevertheless shares in the proceeds of the partnership.
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SIMPLE INTEREST Interest earned only on the initial principal, not on the accrued
interest.
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SINGLE AGENCY The action on the part of a real estate broker to represent either
the buyer or the seller but never both parties in the same transaction.
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SINGLE-FAMILY RESIDENCE (UNIT) A housing unit designed and maintained for occupancy
by only one family. Zoning ordinances as well as subdivision regulations often limit the
use that can be made of certain land to that of single-family residences.
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SINKING FUND Periodic deposits of money into an account that, with its interest
earnings, will be used to replace assets or to retire loans.
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SIOR A professional designation denoting Specialist in Industrial and Office Really
earned by industrial and office Realtors who have established a creditable track record in
either industrial or office real estate transactions for seven years. Candidates also
complete required course work in addition to fulfilling professional experience criteria.
The designation is awarded by the Society of Industrial and Office Realtors, a
professional affiliate of the National Association of Realtors.
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SITE The location or place of a plot of ground set aside for a particular type of
land use.
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SITUS A term used to refer to the economic location of a particular parcel of land.
Economic location is an important factor in determining the success or failure of real
estate. The importance of location is due largely to the fact that individuals need
specific types of land for specific uses at specific places.
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SLUM A part or section of a city or town generally inhabited by the very poor. Such
an area is normally characterized by a large amount of deteriorated housing, poor public
facilities, absentee ownership, and a high incidence of crime.
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SOCIETY OF INDUSTRIAL AND OFFICE REALTORS (SIOR) An affiliate of the National
Association of Realtors whose members specialize in the brokering and marketing of
industrial and office space. Active members of the society, which in 1986 changed its name
from Society of Industrial Realtors to reflect office property brokerage and marketing,
are experienced professionals who have a minimum of seven years of industrial or office
property sales experience and have met a minimum volume of business requirements. They are
trained to match buyers and sellers of unusual and complex industrial and office
properties. The society awards two professional designations: (1) SIOR (specialist in
industrial and office real estate), and (2) P.R.E. (professional real estate executive).
The mailing address is Suite 400, 777 14th Street, N.W., Washington, D.C. 20005-3271;
(202) 383-1150.
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SOFT MARKET A market situation in which there are few buyers and thus those that do
exist are apt to find a great deal of supply given the limited demand.
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SOUTHERN BUILDING CONGRESS INTERNATIONAL, INC. This group provides assistance and
information to local governments in their building code administration. The headquarters
is 3617 8th Avenue South, Birmingham, Alabama 35222; (205) 591- 1853.
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SPEC HOUSE A home either currently under construction or one finished by a builder
in which a Purchaser has yet to be found.
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SPECIAL AGENT A person limited in authority to transact a single business affair or
a specific series of business affairs or to perform restricted acts for a principal.
Ordinarily, a real estate broker is construed to be a special agent. A person dealing with
a special agent Must inquire as to the scope of the agent's actual authority.
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SPECIAL ASSESSMENT An assessment levied against property by a local jurisdiction
when property receives a special benefit which differs significantly from the benefit that
the public at large receives.
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SPECIAL LIEN A claim against a particular piece of property. Examples of special
liens include mortgages, mechanic's and material-man's liens, property tax liens, and
special assessments. In contrast, a general lien is a claim against all of one's property,
both personal and real, such as a federal income tax lien.
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SPECIAL-PURPOSE PROPERTY A type Of improved land that due to certain layout and
design features has only one highest and best use. Examples of special-purpose property
could include a hospital or school.
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SPECIFIC PERFORMANCE Action brought about in a court of law to force a party to
carry out the terms and conditions of a contract.
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SPECIAL USE PERMIT A means by which an individual is legally permitted to make use
of a parcel of land that is an exception to the zoning ordinances.
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SPECIAL WARRANTY DEED A deed in which the seller (grantor) warrants only against
defects of title that have occurred after the grantor acquired title. Because sellers are
often reluctant to assume the risk of title defects which may have occurred prior to their
acquisition of the title, they will limit their liability by giving a special warranty
deed rather than a general warranty deed. The special warranty deed does not contain the
covenant of warranty of title. Instead, the grantor will warrant against defects that have
occurred after the grantor acquired title.
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SPECIFICATION A legal remedy by which a court of law can order a contract to be
performed as agreed to by the parties to the contract. Such remedy is available when the
subject of the contract is a unique good. Since by definition all real estate is
considered unique, the remedy of specific performance is available to both the purchaser
and seller of real estate in case one of the parties attempts to default on the contract.
The term is also used to denote written instructions and information made available to the
contractor of a building detailing the type of construction, material to be used, and
details as to building design, etc.
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SPECULATIVE BUILDER A person who constructs or builds real estate without having a
definite purchaser or tenant under contract at the time construction begins. The builder
begins the construction with the opinion that due to the location of the property, quality
of construction, and/or general business conditions a purchaser or tenant will step
forward prior to completion of the project. Speculative building is particularly common in
the housing industry, especially during times of low interest rates and increases in the
demand for housing. In contrast, a contract builder has entered into a contract with
someone to build or construct a structure for them.
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SPECULATOR A person who acquires title or legal control of real estate with the
belief that due to changing market conditions the property can be sold at a future date
for more than what was initially invested. Such action is particularly common in viable
real estate markets where cities or communities are growing rapidly and the direction of
growth is toward a particular part of the city.
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SPILLOVER EFFECT The economic impact felt by one parcel of land as a result of
changes or modifications of other parcels. Such changes can be the result of both private
and public expenditures. Consider, for example, the impact of building a freeway
interchange next to a parcel of land, or the impact of an adjoining property owner
developing a large shopping center. These modifications and the resulting spill-over
effect will in all likelihood change the highest and best use of the surrounding real
estate.
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SPLITTING FEES The means by which a person shares compensation with one or more
other persons. Generally, a licensed real estate broker can split a commission with any
other licensed real estate broker or with any salesperson licensed on his or her behalf.
Splitting fees with salespersons licensed through other brokers without going through the
licensed broker is illegal, as is splitting a fee or making compensation to any unlicensed
person for assisting in the transaction.
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SPOT ZONING A rezoning of a particular parcel of land to a zoning classification
which is significantly different from the adjoining properties. Generally, spot zoning
involves a relatively small parcel of land. Such action has normally not been favored by
the courts unless it can be shown that such action is in line with the general
comprehensive master plan of the jurisdiction.
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SPREADING AGREEMENT An agreement by a mortgagor (borrower) to place additional
property under the provisions of an existing mortgage. The purpose of such action is to
give the mortgagee (lender) additional security for a loan.
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SQUARE-FOOT METHOD A technique used to estimate the total cost of construction in
which the total number of square feet to be constructed is multiplied by a cost per square
foot figure to derive total cost. Builders and architects have some idea as to what a
particular type of construction will cost on a square-foot basis, given the quality of
construction desired, the amount of materials to be used, and the manner in which
construction will take place. By having a cost per square foot available to them, the
estimate of total construction cost is obtainable.
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SQUATTER A person who is occupying the land of another without legal title or
authority to do so.
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SQUATTER'S RIGHT The legal right of a person who is in adverse possession of the
land belonging to another. Such a person is referred to as a squatter and may under
certain conditions acquire legal title to the land through the open, actual, notorious,
and continuous use of the land.
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SRA An appraisal designation denoting Senior Residential Appraiser (SRA), awarded
by the Appraisal Institute. Membership is intended for professionals who specialize in the
appraisal of residential properties including single family-homes, condominiums,
townhouses, and multi-family structures up to four units.
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SREA An appraisal designation denoting Senior Real Estate Analyst (SRE,4) awarded
by the Society of Real Estate Appraisers. An SREA is an SRA or SRPA whose practice has
expanded to encompass all forms of appraisal assignments as well as analytical assignments
such as market feasibility studies.
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SRPA An appraisal designation denoting Senior Real Property Appraiser (SRPA),
awarded by the Society of Real Estate Appraisers. Membership consists of those
professionals who have expanded their appraisal practice to include the appraisal of
income-producing properties.
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SRS A real estate designation denoting Specialist in Real Estate Securities. The
SRS designation is awarded by the Real Estate Securities and Syndication Institute
(RESSI), an affiliate of the National Association of Realtors.
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SR/WA A designation denoting Senior Right of Way Agent. The designation is awarded
by the International Right of Way Association.
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STAKING A means by which the geographic boundaries of a parcel of land are
identified by placing stakes in the ground at the boundary points.
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STAMP TAX The dollar cost of stamps which in some jurisdictions are required to be
affixed to certain legal documents such as deeds prior to recordation in the land records.
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STANDARD METROPOLITAN STATISTICAL AREA (SMSA) A reference to a geographic area
which contains at least 50,000 residents. Qualification as an SMSA is often required in
order for an area to qualify for certain types of federal programs and grants. Today, such
an area is normally referred to as a Metropolitan Statistical Area (MSA).
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STANDARDS OF PRACTICE A set of professional standards established and adopted by
the National Association of Realtors. These standards are interpretations of the Realtors
Code of Ethics.
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STANDBY COMMITMENT An agreement between a real estate lender and a builder whereby
the lender stands ready to make a certain loan amount available to the builder for a
specified period of time. Normally, a fee for making such a commitment is charged by the
lender to compensate the lender for the risk and legal liability in committing funds to
the builder. Normally, the fee is forfeited if the funds are not borrowed.
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STARTER HOME The first home purchased by someone.
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STATEMENT OF RECORD A written document that must be filed with the Department of
Housing and Urban Development (HUD) by a developer of 50 or more lots who intends to
market the lots through any means of interstate commerce. Registration is required under
the Interstate Land Sales Full Disclosure Act. In addition, certain disclosure must be
made to prospective purchasers. Violation of the act may lead to fine or imprisonment.
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STRAIGHT-LINE METHOD OF DEPRECIATION A method of computing depreciation for income
tax purposes in which the difference between the original cost and the salvage value is
deducted in even installments over the depreciable life of the asset.
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STRAW MAN Someone who purchases property on behalf of another so as to conceal the
identity of the true owner. A person who purchases on behalf of another is sometimes
referred to as a nominee.
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STREET ADDRESS An easy and quick way of identifying a parcel of land. To have mail
delivered or to find a house that has been advertised being "For Sale" normally
require no more exact legal description than this method..
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STRICT FORECLOSURE A type of mortgage foreclosure in which the mortgagee (lender)
acquires all of the legal interest in the property without having to sell the property.
This kind of foreclosure is not favored in this country because the mortgagor (borrower)
loses all equity invested in the property. Most states have foreclosure by sale in which
the pledged property is sold at public auction with the proceeds used to pay off the debt
and any remainder being returned to the mortgagor after a deduction of costs.
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SUBDIVISION A parcel of land that has been divided into two or more smaller lots.
An example would include a 500-acre tract that has been platted and made ready for the
building of homes. The subdivision has been recorded in the land records of the county
where the land is located and is available for individuals to purchase the lots and or
builders to purchase the lots and in turn construct houses on the lots.
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SUBDIVISION REGULATION(S) A local ordinance that establishes various minimum
standards that must be met before a subdivision will be approved for development. These
standards relate to the size of lots, width of the streets, curbing, lighting, drainage,
and other improvements. If a developer wishes to turn the streets and public areas over to
the local government for it to maintain, minimum construction-quality standards must be
met before the local government will accept responsibility.
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SUBJECT BUILDING The building being appraised in an appraisal assignment.
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SUBJECT PROPERTY The reference made to the property being appraised in an appraisal
report.
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SUBJECT TO MORTGAGE A real estate transaction in which the grantee (purchaser)
takes over the existing mortgage payments from the grantor (seller) but assumes no
personal liability on the mortgage. When a mortgage is taken subject to, the purchaser can
walk away from the mortgage and lose nothing but the equity already invested. If, however,
the purchaser assumes the mortgage, he or she becomes personally liable for any
deficiencies occurring in a foreclosure sale. In both situations the original borrower is
liable to the lender unless specifically released in a novation.
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SUBLEASE A lease agreement in which the lessee (tenant) transfers some of the
interest in the leased property to a third party (sublessee) but retains some reversionary
interest for himself or herself. In a sublease the sublessor has a sandwich lease and no
direct legal relationship is created between the landlord and the sublessee. A sublease is
really an estate within an estate. The lessee becomes a sublessor and a landlord/tenant
relationship is established between the sublessor and the sublessee. Since the sublessor
can only convey the rights which he or she has, the sublessee is effectively bound by any
limitations in the main or underlying lease. The sublessor remains primarily liable to the
landlord for rent and the performance of all covenants.
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SUBLESSEE The tenant under a sublease who has subleased from someone who in turn is
a lessee (tenant) of the owner of the property.
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SUBLESSOR A lessee (tenant) who leases part of his or her interest to a third party
(sublessee) but retains some interest in the property.
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SUBMARGINAL LAND Land that because of location, topography, or some other defect is
economically not viable for development.
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SUBMORTGAGE A situation in which a mortgagee (lender) borrows money from a third
party and pledges a mortgage he or she is holding as security for the borrowed funds.
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SUBORDINATION CLAUSE A clause which may be included in a mortgage agreement in
which the mortgagee (lender) agrees to permit a later-acquired mortgage to have legal
priority. Such a clause is often included in a purchase money mortgage used in the
acquisition of acreage property requiring a later construction or development loan. For
example, a developer agrees to purchase 500 acres from a landowner for $100,000 down and a
purchase money mortgage (owner financing) of $2,000,000 for the remainder of the purchase
price. The developer may have paid a slightly higher price to induce the landowner to
subordinate his legal position to an $8,000,000 loan secured by a mortgage being issued by
a commercial bank. Thus, the commercial bank is in a first lien position and the landowner
is in a junior (second) mortgage position.
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SUBORDINATED GROUND LEASE A land (ground) lease in which the rent payment due from
the lessee to the lessor is subordinated to the debt service owed by the lessee to the
mortgagee (lender). Normally, a ground lease contains such a clause in that without such a
clause it may be more difficult to construct improvements on the land. A lender, without a
subordination agreement by the lessor of the land, will only consider the value of the
leasehold in making the loan, while with a subordinated ground lease the lender will
consider the full value of the property.
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SUCCESSION The legal transfer of a person's interest in real property under the
laws of descent and distribution. If a person dies without a will (intestate) his or her
real estate will pass directly to the person's heirs as defined by the state law in which
the real estate is located, subject to the debts of the decedent. A court in the state
where the decedent lived will appoint a person called an administrator to dispose of the
property of the estate. The administrator will collect the assets of the estate, pay
debts, and distribute the remainder. The administrator is usually required to put up a
bond and may sell that real property which is necessary to pay off the estate's debts if
the sale of personal property produces insufficient proceeds. The real estate remains
charged with debts of the estate until the state's statute of limitations has expired.
States have different rules as to who receives property of the decedent. For example,
depending on the state, a wife might receive half the property, the same share as the
children, a dower's share, or the entire property.
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SUFFERANCE The passive consent given to someone as a result of no action.
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SUFFICIENT CONSIDERATION The value which the law finds necessary in order to
support the creation of a binding contract.
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SUIT A court action to enforce a legal claim or right.
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SUPERADEQUACY A feature of a building which is not fully valued by the marketplace.
For example, if a house had a marble sink with 24-karat gold faucets, the market would
probably not add the cost of the sink and faucets to the value of the home. The sink would
be referred to as a superadequacy.
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SUPPORT DEED A deed conveyed by a grantor to another person in consideration for an
agreement to take care of the grantor for life.
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SURETY BOND A bond issued by a company guaranteeing the performance or action of
someone such as a contractor or builder. Surety bonds involve three parties: (1) the
principal, the individual or company on whose behalf the surety bond is issued; (2) the
obligee, the owner or person assured of performance; and (3) the surety, the company
issuing the surety bond.
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SURFACE RIGHT The legal right to use or occupy the surface of land. The owner of
land may convey the surface rights to someone else and retain the subsurface or mineral
rights.
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SURPLUS FUNDS The money obtained at a foreclosure sale over and above the amount
necessary to pay the outstanding liens against the property.
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SURRENDER The giving back of an interest in an estate to the person who has the
reversion or remainder interest. An example of surrender would be the giving up of the
lease by the lessee (tenant) to the lessor (landlord) prior to the expiration of the
leasing term. In the case of a lease, surrender by the lessee and acceptance by the lessor
terminates the lease either by mutual agreement or by operation of law. Surrender and
acceptance occurs by mutual agreement if the lessee offers to terminate the lease, which
is the surrender, and the lessor agrees to the offer, which is the acceptance. Surrender
is distinguished from mere abandonment. A lessee may not just walk away from a lease and
hope to escape legal liability. A lessor does not show acceptance by entering on the
realty in order to protect it after abandonment. The landlord may attempt to lease the
property for the best terms that he or she can get in order to mitigate (minimize)
damages, and to sue the breaching lessee for the actual injury suffered. Surrender and
acceptance, however, will occur by operation of law if the landlord takes unqualified
possession of the property and gives a new lease without reservation.
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SURVEY The process by which the precise physical boundaries of a parcel of land are
measured. Legal descriptions appear in listing agreements, sales contracts, deeds,
mortgages, notes, and other instruments involving rights and interests in real estate.
When land is conveyed from one party to another, the instrument of conveyance needs to
contain a legally sufficient description of the parcel. Courts have interpreted this to
mean that property is sufficiently described if a competent civil engineer or surveyor
could locate the subject property given the land description.
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SURVEYOR A person sufficiently trained to locate and record the exact physical
boundaries of a parcel of land. When property is conveyed from one party to another it is
important to identify positively the exact boundaries of the property so that there is no
doubt where the property lies in relation to all other parcels. To accomplish this task a
survey is made. A surveyor physically inspects and measures the property. The precise
measurements are included in the deed used to transfer ownership of the property.
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SURVIVORSHIP The living of one or more persons after the death of another
person(s). In real estate ownership survivorship occurs when one or more owners in a joint
tenancy or one of the parties in a tenancy by the entirety survives or outlives the
deceased tenant(s).
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SUSPENSION A temporary stop or forced inactivity against someone. In the real
estate brokerage business, a real estate commission has the power to suspend the license
of a broker or salesperson. During the time of suspension, the suspended licensee is
legally barred from performing any of the activities or services which require a real
estate license.
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SWEAT EQUITY A contribution to the value of real estate in the form of labor
provided or services rendered. Sweat equity is normally associated with someone who
purchases property that needs work, perhaps is below acceptable building code standards
and normally has a market value below that of property that is not in disrepair. The
purchaser, by performing some of the repair work personally, can increase the value and in
turn, the marketability of the property, and is thus contributing sweat equity to the
property.
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SWEETENER Something added to a deal to make it more attractive to an investor or
lender. A lender making a commercial loan may require the developer/owner to pledge a
certain part of the income generated by the project as partial payment to the lender over
and above the debt service. The income generated by the sweetener serves to increase the
lender's rate of return.
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SWING LOAN A loan, normally short term, used by an owner to purchase real estate
pending the sale of another property. Normally, the loan is repaid from the owner's equity
if and when the previous property sells.
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SYNDICATION An arrangement by which two or more people are assembled for the
purpose of raising equity capital for purchasing real estate or other @s of investments.
Normally, the more desirable income-producing properties available are too expensive for
the average investor to purchase alone. Therefore, in order to purchase such properties,
it is common for investors to combine their resources and establish some form of multiple
ownership arrangement such as a corporation, cooperative, condominium, tenancy in common,
or partnership.
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SYNDICATOR A person who establishes and sells shares in a syndication.
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