Real Estate Key Terms 15-19

Federal Book

Encumbrance

A claim that lessens property value.

Real Estate Taxes

Ad valorem taxes based on property value.

Equitable Right of Redemption

Taxpayer's right before tax sale.

Statutory Right of Redemption

State's right after tax sale.

Subordination Agreement

Changes order of lien priority.

Estate Tax Lien

Involuntary lien on deceased's property.

Inheritance Tax Lien

Statutory lien on deceased's estate.

URAR

Standard report required by Fannie Mae and Freddie Mac.

Market Value

Most probable price in a fair sale.

Principle of Substitution

Buyer won't pay more than equivalent property cost.

Sales Comparison Approach

Uses comparable property sales to appraise value.

Cost Approach

Values property based on construction cost and depreciation.

Straight-Line Method

Depreciation calculated evenly over an asset's life.

Income Approach

Values property based on potential future income.

Net Operating Income (NOI)

Annual income after deducting operating expenses.

Effective Gross Income

Potential income minus vacancy and rent loss.

Reconciliation Process

Weighs validity of appraisal methods for final value.

Holdover Tenancy

Tenant remains after lease ends, landlord accepts rent.

Month-to-Month Tenancy

Common residential lease with monthly renewal.

Tenancy at Sufferance

Tenant stays without landlord's consent after lease ends.

Potential Gross Income

Total income property could generate before deductions.

Assignment of Lease

Transfer of tenant's lease obligations to another.

Recording of Lease

Legal requirement to document lease agreement.

Percentage Lease

Rent based on tenant's gross sales.

Graduated Lease

Specifies scheduled rent increases over time.

Index Lease

Rent adjusts based on economic indicators.

Uniform Residential Landlord and Tenant Act

Standardizes landlord-tenant laws across states.

Equal Opportunity in Housing

Marketplace for similar financial means housing choices.

Civil Rights Act of 1866

Prohibits all racial discrimination in real estate.

Familial Status

Protection for families with children or pregnant women.

HUD

Department of Housing and Urban Development, enforces Fair Housing Act.

Equal Housing Opportunity Poster

Promotes awareness of fair housing rights.

Exemptions from Fair Housing Act

Includes owner-occupied buildings with four or fewer units.

Single-Family Home Sale Exemption

Applies if fewer than three homes are owned.

Housing for Older Persons Act of 1995

Repealed certain requirements for age-restricted housing.

Familial Status Exemption

Housing restricted to age 62 or older.

Reasonable Modifications

Alterations for disability access must be allowed.

Americans with Disabilities Act (ADA)

Prohibits discrimination in employment and public accommodations.

Conciliation

Resolution of complaints within 100 days of filing.

Administrative Law Judge (ALJ)

Hears complaints brought to HUD for resolution.

Complaint Filing Deadline

Must be filed within one year of discrimination.

Civil Action

Legal action taken by a complainant in court.

Civil Rights Act of 1866

Legislation allowing direct federal court complaints.

Asset Management

Guidance on real estate investment decisions.

Net Profit Calculation

Gross receipts minus operating expenses and interest.

Rent Determination

Set monthly rate per unit or square foot.

Commercial Tenant Considerations

Factors influencing tenant suitability and compatibility.

Title I of ADA

Applies to employers with 15+ employees.

Title III of ADA

Prohibits discrimination in public accommodations.

Equal Credit Opportunity Act (ECOA)

Prevents loan denial based on personal characteristics.

Real Estate License Requirement

State law may require licensing for property management.

Sick Building Syndrome (SBS)

Health issues linked to building environment.

Building-Related Illness (BRI)

Health problems caused by building conditions.

VISE

Voluntary

Involuntary

Statutory

Equitable

Liens

Conformity

Means that maximum value is created when a property is in harmony with its surroundings

Contribution

value of any part of property is measured by its effect on the value of the whole parcel

Functional Obsolescene

A loss in value from the market’s response to the item

External Obsolescene

If depreciation is caused by negative factors not on the subject property, such as environmental, social, or economic forces, always curable

Income Approach Acronyme

GIVEN

Gross

Income

Vacancy

Expenses

Net operating income

Gross rent multiplier (GRM)

Based on monthly rental income that could be used for a rough approximation of value, used if buyer interested in buying a 1-4 unit residential rental property

Gross Income Multiplier (GIM)

If buyer interested in buying 5 or more units, based on annual income

Reconcilation

Act of analzying and effectively weighing the findings from the 3 approaches

Leasehold estate

Tenant’s right to possess real estate for the term of the lease

Renewal option

Lease may contain clause that grants the lessee the privilege of renewing the lease

Purchase option

Some leases grant the lessee the option to purchase leased premises

Right of first refusal

Allows tenant the opportunity to buy the property before the owner accepts an offer from another party

Housing for Older Persons Act (HOPA)

Repealed the requirement that housing intended for those age 55 or older have “significant facilities and services” designed for seniors

Dwelling

Any building or part of a building designed for occupancy as a residence by 1 or more families

Familial Status

Defined as one or more individuals under 18 living with a parent or guardian

Fire and hazard insurance

Provide coverage against direct loss or damage to property from a fire on the premises

Consequential loss, use, and occupancy

covers the results of a diasaster

Contents and personal property

Covers building contents and personal property during periods when they aren;t acrtually on the premises

General liability

Covers the risks an owner assumes whenever the public enters the building

Casualty

Include coverage against theft, burglary, vandalism, and machinery damage, as well as health and accident insurance

Surety bonds

covers an owner against financial losses resulting from an employee’s criminal acts or negligence while performing assigned duties