Real Estate Terms

Acres per square mile

640

equity skimming

a real estate fraud scheme where an investor or scammer takes title to a distressed property, collects rent from tenants or the former owner, and intentionally fails to pay the mortgage, leading to foreclosure

straw buyer

is a person who purchases an asset, product, or service on behalf of someone else, masking the identity of the actual beneficiary or user.

cost approach

The total dollar expenditure (materials, labor, land, and development) required to build, reproduce, or replace a physical structure

value approach

The most probable price a property will fetch in a competitive, open, and fair market between a willing buyer and seller. Determined by what the market is willing to pay based on utility, desirability, and economic conditions

sales comparison approach

A valuation method that estimates a property's value by analyzing recent sales of similar ("comparable") properties in the same market.

new construction, unique/custom/historical

when you should use a cost approach

commercial, office buildings, apartments, retail

when you use income approach

standard, single family residential and vacant land

when you use sales comparison approach

loan divided price times 100

how to calculate LTV ratio

short sale

A distressed homeowner sells a property for less than is owed; requires lender approval

quiet title action

A legal proceeding used to establish or settle ownership of real or personal property when there are competing claims, liens, or disputes

REO (real estate owned)

Real estate owned property; when foreclosed homes don't sell at auction, they become a real estate owned (bank-owned) property

GRM (Gross Rent Multiplier)

A quick screening metric used to estimate and compare the value of income-generating rental properties

NFIP (national flood insurance program)

A federal program created to help mitigate future flood losses through the use of building and zoning ordinances, and by providing homeowners with access to affordable flood insurance protection

Novation

an agreement that substitutes a new contract, obligation, or party in place of an existing one. requires total consent of all parties involved

Foreclosure

A lender forces the sale of a property because the buyer has defaulted on the loan

FHA Loan

Loan that allows you to put 3.5% down with less strict credit score requirements

USDA Rural Development Loan

A government-backed mortgage designed to help low-to-moderate-income buyers purchase homes in eligible rural and suburban areas with no down payment and low interest rates.

VA Loan

$0 down, no PMI, No loan limits, primary residence only

AKA: a government-backed mortgage issued by private lenders and partially guaranteed by the U.S. Department of Veterans Affairs (VA) to help eligible service members, veterans, and surviving spouses buy, build, or repair a primary residence.

Conventional Loan

real estate mortgage that is not insured or guaranteed by a government agency. Instead, these loans are originated and backed by private lenders (like banks, credit unions, or mortgage companies) and can be used to buy a home, finance a second home, purchase an investment property, or refinance an existing mortgage

Flashing

Metal or rubber strips installed at corners and edges of roofing, chimneys, etc., to prevent moisture penetration.

Expansion

Economic growth picks up, job numbers improve, and population or household demand increases. Demand outpaces available inventory, leading to rising home prices and strong rent growth. New construction ramps up to catch up with demand

Over supply

in response to high profits, and new inventory floods the market just as high prices or rising interest rates start to cool buyer demand. Vacancy rates tick up, and price or rent growth begins to decelerate.

Recession

Supply significantly exceeds demand. Job losses, tighter lending standards, or macroeconomic pressures cause buyer confidence to plummet. Property values drop, construction halts, and foreclosures or distressed sales can rise

Recovery

The market bottoms out or stabilizes after a downturn. Demand is weak, occupancy or home sales are low, and rental or property prices are flat or depressed

Promissory Note

Unlike a mortgage or deed of trust, not recorded; held by lender until mortgage is paid off. When it is fully paid off, returned to the borrower, marked as paid in full.

annual property tax bill divided by number of days in year multiplied by days owned/unpaid

Prorated tax calc.

Void

Has no legal effect because it’s missing something essential or violates the law.

Voidable

A contract that is legally binding but may be rejected or canceled by one party due to certain legal reasons.

Executed

is an agreement where all participating parties have signed the document and fully fulfilled all of their legal obligations, meaning the transaction or agreement is completely finished

Executory

contract is signed and active, but one or both parties still have ongoing duties to perform over time

75k

homestead exemption max

Accretion

The gradual growth in the size of a land parcel due to water-deposited sand, silt, or gravel

Avulsion

A loss of existing land by the sudden change in a watercourse, washing it away

Gross lease

The tenant pays a fixed rent and the landlord pays all operating expenses; most common type of lease used in residential rentals

Net lease (triple net lease)

The tenant pays on top of the rent one or more of the following expenses: property taxes, property insurance premiums, or maintenance costs (all three is called?)

lien theory

A state that goes under the presumption that a lender's mortgage is a lien on the property.

mortgage banker

An entity that makes and services mortgage loans

mortgage broker

A service professional who acts as a liaison between borrowers and lenders for a fee

life estate

A freehold estate granted for someone’s lifetime

10 days after offer to purchase

when is RECR due?

WB-11 offer to purchase

where do seller disclosures occur?

1% of loan amount (not price)

how to calculate discount points

conversion

Using escrow funds for personal or business purposes AND The wrongful use, possession, or control of someone else’s personal property without permission.

commingling

Mixing or depositing funds belonging to others (trust or escrow funds) with business or personal funds

using vs simply mixing

difference between conversion and commingling?

legally permissible use

used to determine a property’s "highest and best use." It means the proposed use complies with Local zoning ordinances (such as residential, commercial, or industrial designations), Building codes and safety regulations, Deed restrictions, easements, and Environmental or historic preservation laws

instrument

Evidence of a pledge of an asset, to be used as security for a loan

deed in lieu of foreclosure

A defaulting borrower voluntarily conveys the deed to the lender to avoid foreclosure

title theory

A _____ state says that the lender owns the property until the loan is paid off.

freehold estate

An inheritable estate with absolute ownership

possession, control, disposition, enjoyment, exclusion

what are the bundle of rights

timeshare instrument

the master legal document or set of documents—such as a declaration, master deed, or covenants—that creates, establishes, and governs the operation of a timeshare plan or property

Americans with Disabilities Act (ADA)

A U.S. federal law passed in 1990 that prohibits discrimination against individuals with disabilities in employment, public services, public accommodations, transportation, and telecommunications, ensuring they have equal rights and opportunities

Civil Rights Act of 1866

The first statute affecting equal housing opportunity largely interpreted to prohibit racial discrimination

Civil Rights Act of 1964

A federal law that established protections against discrimination in employment and other areas of public life

Clean Water Act

Established quality standards for surface waters and added a structure to regulate pollutants (e.g., oil) discharged into U.S. waters

Community Reinvestment Act (CRA)

A federal law requiring lenders to meet the credit needs of the communities they serve by expanding credit to low- and moderate-income people.

Dodd-Frank Wall Street Reform and Consumer Protection Act

The act that brought about the creation of one set of mortgage loan disclosures (the Loan Estimate and Closing Disclosure) that TILA and RESPA require

Equal Credit Opportunity Act (ECOA)

A 1974 federal law that prohibits discrimination based on protected class status when providing credit.

Fair Credit Reporting Act (FCRA)

A consumer protection law regulating disclosure of consumer credit reports by credit reporting agencies and establishes procedures whereby consumers can correct mistakes in their records (AKA: A federal law that regulates how consumer's credit information is used and collected)

Fair Housing Amendments Act of 1988

This amended fair housing act broadened the scope of protections, enhanced enforcement process, and added familial status and disability as protected classes.

Federal Fair Housing Act of 1968

This original fair housing act prohibited discrimination based on race, religion, color, and national origin in the sale or rental of residential real estate, sex was added later as a protected class.

Federal Trade Commission Act

A federal law passed to prevent unfair methods of competition and deceptive advertising; created the Federal Trade Commission

Home Mortgage Disclosure Act (HMDA)

requires financial institutions to make mortgage data available to the public

Homeowner and Equity Protection Act (HOEPA)

Addresses abusive practices in refinancing and home equity loans by requiring special disclosures and restrictions on loan terms; an amendment to the Truth in Lending Act

Housing and Community Development Act of 1974

This Act changed Section 109 of Title I in the Fair Housing Act to include sex in the list of protected classes.

Housing for Older Persons Act of 1995 (HOPA)

States that communities and facilities that meet certain criteria for providing housing to older persons are legally exempt from the familial status discrimination

Real Estate Settlement Procedures Act (RESPA)

requires borrowers to be provided with a good faith estimate within three business days of receiving a completed loan application.

Superfund Amendments and Reauthorization Act (SARA)

Passed in 1986, this expanded the definition of individuals liable for environmental cleanup costs. However an amendment was made to CERCLA at the same time for an “innocent landowner” defense.

Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)

Enacted in 1980 Gives the federal government broad authority to respond directly to releases or threatened releases of hazardous substances that threaten public health or the environment.

Truth in Lending Act (TILA)

Requires disclosure of all financing terms when specific trigger terms are used in advertising

Tax(payer) Relief Act of 1997

Allows first-time homebuyers to use as much as $10,000 of their IRA funds to pay the down payment and closing costs of their new home without incurring an early distribution penalty

Uniform Electronic Transactions Act (UETA)

Gives electronic signatures and documents the same legal weight as paper writings and signatures

Uniform Standards of Professional Appraisal Practice (USPAP)

The ethical and performance standards for the appraisal profession in the U.S. Compliance is required for state-licensed and state-certified appraisers involved in federally-related real estate transactions

income approach

Valuation method where one converts a property's future income stream and net operating income (NOI) into present value using capitalization rates or discounted cash flow (DCF) analysis.

erosion

The gradual, natural wearing away of land or soil by the action of water, wind, or currents.

reliction

The gradual and permanent recession or drying up of a body of water (such as a lake or river), exposing land that was previously submerged.

property price divided by gross annual rental income

how to calculate GRM

Residential Listing

WB-1

Farm listing

WB-2

Vacant land listing

WB-3

residential condo listing

WB-4

commercial listing

WB-5

business listing

WB-6

residential offer to purchase

WB-11

farm offer to purchase

WB-12

vacant land offer to purchase

WB-13

residential condo offer to purchase

WB-14

commercial offer to purchase

WB-15

business with real estate offer to purchase

WB-16

business without real estate offer to purchase

WB-17

buyer agency agreement

WB-36

amendment to offer to purchase

WB-40

amendment to listing contract

WB-42

counter offer

WB-44

residential pre-agency showing agreement

WB-50

ERD penalties

can impose administrative forfeitures up to $10,000 for a first-time violation, Subsequent violations within a specified timeframe can reach $25,000 and $50,000, can also order injunctive relief, out-of-pocket expenses, attorney fees, or mandatory fair housing

REEB penalties

can penalize licensed agents with an additional fine up to $1,000 and up to six months in jail, Because housing discrimination constitutes a violation of professional conduct, the board can issue a formal warning, require additional education, or suspend or revoke the professional's real estate license