[B]

backup loan commitment  A loan commitment that is effective only if an earlier, and usually very favorable, loan commitment fails to materialize.

backup offer  An offer to purchase that is contingent upon failure of a pending sale to close escrow.

back-to-back escrows  Two separate escrows of different parcels of real property where the seller of one is the purchaser of the other.  The close of the two escrows is concurrent so that the proceeds from the "sale" escrow can be used instantly as payment in the "buy" escrow.  Neither the licensee nor the escrow agent has a duty to disclose that one escrow is intertwined with another.  Thus, an unqualified or under-financed buyer can use this technique to buy and sell real estate simultaneously.  Sometimes back-to-back escrows are used when one property is being purchased, using one escrow, and simultaneously being resold using a second escrow.  The “buyer” simultaneously resells to raise the money necessary to make the initial purchase--credits from the “sale” escrow  are simply applied by the escrow company to the “purchase.”

bad faith  The deliberate failure to fulfill some duty or contractual obligation owed to another (e.g., a purposeful failure by an insurance company to pay a lawful claim).  Bad faith is more than mere breach of contract which may occur because of uncontrollable reasons, such as market conditions.    Bad faith is a tort based upon wrongfulness.

bail out  To leave, as when many tenants decline to renew at the end of their leases, or when limited partners abandon a failed syndication.

bailout  To rescue a failing business by, for example, investing new capital.

balloon payment  The final payment on an installment note which is greater than each of the preceding periodic payments, and which ordinarily pays the note in full. If an unpaid balance remains following a balloon payment, the payment is more likely called a “pay down” or “principal payment.”   Balloon payments are commonly found in creative financing arrangements where the seller has accepted a second deed of trust or a wraparound mortgage as security for an unpaid portion of the purchase price.  A borrower who agrees to a balloon payment, in, say, five years, is gambling that interest rates will decline and that the balloon can be paid through more desirable refinancing.  See also bullet loan.
ballot box planning  Land use restrictions, or growth controls, created by voters rather than by local government officials. Voters create controls through the initiative process, by which land use laws can be created without approval by local government. Generally, ballot box planning means increased growth controls in affluent communities and relaxed growth controls in modest or low income communities.  Many contend that land use planning should be the exclusive business of planners and local government officials.  But courts generally have authorized the placement of planning issues on ballots and enforced the results.

bankruptcy  Proceedings under federal law whereby all assets of a debtor (excluding certain exempt property) are distributed to his or her creditors.  The debtor is then “discharged,” or excused from the legal obligation to pay most of the debts.

bar association  A professional organization of attorneys who are licensed to practice law.

bare title  syn  naked legal title  The title that is held by a trustee under a deed of trust.  Bare title is a type of non-possessory ownership.

bar examination  Test given to otherwise qualified lawyer candidates (generally law school graduates), the purpose of which is to assure possession of minimum standards of knowledge of the law before engaging in its practice.

baselines  The imaginary east-west lines that intersect meridians to form a starting point for the measurement of land.  California has three baselines that intersect meridians: one in San Bernardino County, another at Mount Diablo, and a final baseline in Humbolt County.  They are part of the U.S. rectangular survey system of property description.   See also legal description.

base rent   The minimum monthly rent in a percentage lease.  Regardless of the volume of the tenant’s business, the landlord is assured of the base rent.

basing index  The measure of interest rates on which changes in adjustable rate mortgages are based.  U.S. Treasury note yields are one example of a basing index.  There are many basing index as indexes in use.

basis point  One percent equals one hundred basis points.  Basis points are used to describe changes in interest rates, as “The rate should be reduced by forty basis points.”

bedroom community  A community of commuters that generally lacks industry of its own.

below-market interest rate mortgage,  (BMIR)  A new mortgage with a contract rate of interest less than the market rate of interest.  A subdivider may buy-down the interest rate with a cash payment to the lender.  Such a buy-down is a sales incentive and results in a BMIR for the home buyer.  See also buy-down.

beneficiary  Someone entitled to the benefits of a trust.  In a trust deed, the lender is the beneficiary and the borrower is the trustor.  A trustee is a “disinterested third party” whose duty is to hold legal title to the real estate, which is the security for the loan, until the loan is paid.  There is no beneficiary in a mortgage as the creditor is called “mortgagee.”

beneficiary's statement  The statement of a lender about the remaining unpaid principal due on a note and other information concerning the loan.  It is usually obtained in connection with the sale or refinancing of real property.  Naturally, lenders charge a fee for the preparation of these statements.

bias  A preconceived belief about some person or fact that makes it difficult to be neutral, dispassionate, or fair in evaluating that person’s rights and duties, guilt or innocence.

bill of sale  A written document used to transfer title to personal property.  It is to personal property what a deed it to real property.  Many transactions involve the conveyance of both real and personal property.  The sale of an apartment building involving furniture and equipment is an example and involves the execution of both a deed and a bill of sale.

binder  A temporary agreement by an insurance company to cover a specified risk pending final approval of an application for insurance.  A binder may also be issued to extend existing coverage to an added risk.  Some real estate people also use "binder" as a synonym for "earnest money."

bird-dog  A person, usually not licensed, who hunts for available real estate suitable for development, who then attempts to tie it up with a disguised option, and who  then tries either to sell it to a developer at a higher price in a double escrow transaction or to submit it to a developer in exchange for a finder's fee.  A middleman.

biting the bullet  A phrase used to describe the purchase of real estate, usually commercial, which results in an immediate negative cash flow.  The purchaser usually anticipates that  income tax advantages and appreciation will more than compensate for the cash drain.  Few investors have needed to “bite the bullet” during the 90s when very favorable purchase terms have been widespread.

biweekly mortgage  A mortgage with an amortization schedule calling for payments every other week rather than every month.  The advantage to a more frequent payment schedule is that total interest charges are substantially less than with an ordinary monthly mortgage.  The amount paid every two weeks is exactly one half of what would be paid every month.  But since money is borrowed for a shorter period, less interest is accrued.    Biweekly mortgages may be at a fixed or adjustable interest rate.

blanket deed of trust or mortgage  syn  overriding deed of trust  A single mortgage or deed of trust that covers, or "blankets," more than one parcel of real estate as security for the repayment of a debt.  A blanket mortgage often covers an entire subdivision.  As individual lots are sold, partial releases from the blanket mortgage are made.  This allows the subdivider to pay for the ground under each house with the proceeds from the sale of each house.

blanket policy  syn  master policy  An insurance policy where all the units in a condominium, co-op, or planned unit development are insured for fire under one blanket or master fire insurance policy.  This approach generally is less expensive than if all the owners insured their individual units separately.  Personal property, however, must be insured separately.

bleeding  syn  milking  See milking.

bleeding a project  The withdrawing of funds from a project that ought to be expended upon maintenance and repair, or similarly important requirements that would improve or at least maintain its value.

blended mortgage  A mortgage with an interest rate that is the average, or a "blend," of two different interest rates, such as the current market rate and the rate of the old, refinanced mortgage.  A blended mortgage makes refinancing with the existing lender more attractive than refinancing with a new lender who might insist on market rates of interest for the new loan.

blended space  An interior design featuring the minimization of hallway spaces with rooms opening directly onto, or blending into, the living room.

blended vacancy rate  A general rate of vacancy that applies to all buildings in all locations.  Blended vacancy rates are not location specific.

blighted area  A neighborhood or area in which real property values are affected seriously by adverse economic forces, such as encroaching inharmonious property uses, over-crowding, infiltration of lower social and economic classes of people and/or rapidly deteriorating buildings.  Physical examples of blight are broken windows, unkept yards, grass growing in rain gutters or on roofs, motorcycles and junk vehicles, and foil in windows.

blind ad  A real estate for sale ad by a licensee that fails to reveal his or her status as an agent.
It is an improper advertising technique.

BLM  Bureau of Land Management  See Bureau of Land Management.

blockbusting  An unethical marketing technique designed to capitalize on homeowners' racial or ethnic prejudices.  Blockbusting may cause panic selling and affect sales prices.

blue sky  Hype.  Any statement of sweeping import without much factual underpinning, such as "One day you will see a lake and eighteen hole golf course here in the Mojave," is said to be mostly blue sky.

BMIR  below-market interest rate mortgage  See below-market interest rate mortgage.

board of directors  A group of usually three or more persons elected by the stockholders to set basic company policies and to appoint the top executives who actively manage a business corporation.

Board of Realtors  A local association of members of the state and National Association of Realtors.

boilerplate  The standardized preprinted language in a contract.  Much of it appears to be useless to the uninformed, but boilerplate actually can and often does affect important legal rights.  Unfortunately, boilerplate often is lengthy, complicated, and replete with difficult terminology.

boiler room sales  High pressure telephone sales tactics usually involving securities or interest in land.

bona fide  A legal status of being without conflict of interest or knowledge of wrongdoing.  A bona fide purchaser gives honest value and is not in collusion with the seller.  A bona fide sale is a genuine sale.  See also arm’s-length transaction.

bonus value  The value of or profit in a contract.  For example, a tenant who receives rent concessions (below market rent) in a long-term lease enjoys a substantial bonus value.  Or, a buyer who has a contract to purchase real estate at less than its market value enjoys a substantial bonus value.

boondoggle  An impractical or useless project wasteful of time and money.  See also scam.

boot  The money that compensates for differences in value in an exchange.  Boot is taxable even though the exchange may be tax free.

bottom fishing  Searching, or angling for real estate priced below its economic potential.  Syndications, so-called vulture funds, often "bottom-fish" for solid projects that are underpriced due to overbuilding or tax changes.  The Tax Reform Act of 1986 depressed the prices of many properties that previously had been purchased largely for tax shelter, and thereby created opportunities for bottom fishing vulture funds.

bottom line  The ultimate result.  An income tax return may contain exemptions, exclusions, deductions, credits and tricky formulas for tax computation, but the amount of tax ultimately paid is the taxpayer's "bottom line."  For example, "Forget the details, what's the bottom line?"

bottom out  End of a decline in prices of real estate.  For example, "Many potential buyers are waiting for the market to bottom out."

bottomed out  Without additional financial capability.  An investor is "bottomed out" when he no longer can respond to an assessment for additional capital.

bow-tie loan  A commercial loan that accrues interest at a "contract" rate but whose payments are predicted on a lower "pay" rate.  The effect is to create negative amortization  of the loan.

box home  A variety of kit home.  A prefabricated home delivered in a large steel container, or "box," that becomes an integral part of the structure.  The box folds out and, together with numbered panels, becomes a two-level home.  Box homes were unveiled in Vancouver, B.C., near the Exposition `86 World Fair.

bracketing  Selecting a sales price somewhere between the prices of comparable sales.

breach of contract  The failure to perform the terms of a contract is a breach.  When one party to a contract breaches, the other party has a cause of action in contract, and may either recover damages or obtain a judgment of specific performance to compel performance.  See also judicial remedies.

breakeven point  That point beyond which rent will produce net spendable income.  In investment analysis, it measures the percentage of gross possible income that must be obtained to generate enough cash to pay all operating expenses and debt service.  It is calculated as follows:
operating expenses plus debt service divided by  gross possible income = breakeven point

bridge financing  syn  gap financing  See gap financing.

briefs  Written arguments prepared by attorneys that are addressed to appellate courts about cases on appeal from a trial court judgment.

broker  A person or corporation that acts as an agent for another in the sale of some product.  For example,  real estate brokers (through their sales agents)  hunt  for buyers;  loan brokers hunt for borrowers, and so forth.

brokered loan  Loans secured by real estate that are arranged by a real estate broker, and are therefore exempt from the usury law.

broker incentives  Gifts paid to commercial real estate agents in return for bringing prospective buyers or renters to the owner's vacant office or commercial buildings.  Some real estate firms will not allow its agents to accept broker incentives.  Examples of broker incentives are new cars, paid trips to Hawaii, paid ski weekends and so forth.

broom clean  The condition of cleanliness in which rented premises are to be left following termination of a leasehold, that is, swept clean of dirt and accumulations.

builder  syn  general contractor  See general contractor.

building codes  State, city, and county laws that delineate minimum construction standards.  Compliance with the codes is verified through inspections by county and/or city inspectors.

Building Owners and Managers Association  A professional group comprised of office building owners and managers.

building permit  A necessary permit issued by local government that authorizes the beginning of construction of an improvement to real property.

building residual technique  An appraisal technique in which income is allocated to the land first, the residual income must be allocable to the building, and when capitalized, produces the building value, which is added to the land value to arrive at estimated market value.

build-out  The completion of the interior of a structure that makes the space acceptable to a tenant prior to the commencement of the lease.  It includes the interior partitioning, carpeting, ceiling, lights, and air conditioning system.

build to suit  A transaction in which a landowner agrees to build a structure to suit the specifications of a tenant, who agrees to lease the premises.  The landowner will often use the projected income from the prospective tenant to justify a commitment for the necessary financing.  Thus, the landowner  requires that the tenant be financially strong.

bull-for-a-bear deal  A deal where a buyer offers a seller common stocks instead of cash for the down payment in a discounted sales transaction.  Ideally, from the buyer's standpoint, the common stocks are losers.  They probably will be sold immediately following the real estate transaction to satisfy the need of the cash-hungry seller.  Often used to acquire properties from "don't wanters."

bullet loan  An intermediate term, fixed rate loan with a balloon payment due at the end of three to ten years.  A bullet loan may follow a mini-perm loan, which in turn follows the original construction loan.  Bullet loans are often made by insurance companies that borrow from pension funds, issuing them guaranteed income contracts, called GICs.  The insurance companies expect to make  profits on their bullet loans through loan fees and spreads in the rates.  Bullet loans are typically locked-in to assure an adequate return to the lender.  That is, a large prepayment penalty will assure the lender of the bullet loan that enough proceeds will be realized to justify the deal.

bundle of rights theory  The theory that ownership of real estate includes a group, or bundle of rights, such as the right to possession, the right to exclude others, and the right to sell.

burden of proof  The duty to produce evidence as a trial progresses.  In a civil case, alleged facts must be proved by a preponderance of the evidence.  In a criminal case, the required measure of proof is that alleged guilt must be proved beyond a reasonable doubt.

Bureau of Land Management, (BLM)  A federal agency responsible for all federal lands that are not within the national park and forest system.

business invitee  A person who is expressly or impliedly invited onto the premises by the occupier of land for business purposes designed to produce a profit.

buy-down  A procedure by which a subdivider pays cash to a lender in return for a loan commitment to a home purchaser at below-market interest rates.  Often the interest rates will be bought down for only the first three years of the mortgage, after which the homeowner must pay the market interest rate.  A subdivider who buys down interest rates as a sales inducement may be expected to increase the price of the home accordingly.  Any seller can buy-down the buyer’s interest rate as a sales inducement.  See also three-two-one buy-down.

buyer-cash-out  syn  buyer walkaway and overfinance  A purchase transactions where a buyer takes cash out of close of escrow, leaving the total financing in excess of the value of the property.  For example:  A house's market value is $100,000.  The new loan is $70,000.  The commission and closing costs are $7,000.  The purchase money note is secured by a second mortgage for $50,000.  Cash is distributed:  $50,000 to the seller, $7,000 to the real estate broker and closing costs, and $13,000 to the buyer.  Thus, the seller receives $50,000 in cash and a note secured by a second deed of trust for $50,000 as the purchase price.  However, the buyer "walks away" with $13,000 and may not even bother to take possession of the house.  Before he abandons the property, an especially unscrupulous buyer might rent the home to an innocent tenant and collect deposits and advance rents as well.  Sellers rarely benefit from a sale transaction where the buyer takes net cash from the purchase escrow.

buyer's listing  An agreement where a prospective buyer agrees to pay a commission, or flat fee, to his agent if any property is purchased within the listing period.  It encourages sales agents to search for an appropriate parcel for the buyer.  The commission is reduced or offset by any amount the buyer's agent receives as a shared commission from a listing agent.

buyer's market  The market condition that exists when the supply of a particular class of real estate greatly exceeds demand.  During this period of time sellers are in a weak negotiating position, and often must give concessions to buyers.  California has languished in a buyer's market during the early l990s to the extent that depreciation of property values has occurred.
 
buyer's remorse  A creeping feeling that perhaps the purchase should not have been made.  Usually buyer's remorse occurs after a contract to buy has been finalized, but before escrow has closed.  A buyer with a strong sense of remorse may attempt to rescind the transaction based on some supposed misrepresentation by the seller.

buyer walkaway  syn  buyer cash out  and  overfinance  See buyer cash out.

buying a lawsuit  The purchase of real estate under circumstances that create a substantial likelihood of future litigation.  A classic example is the purchase of real estate subject to a lis pendens.  Another example is the purchase of real estate that appears to be subject to an easement, but against which no recorded easement exists.  Old rutted tire tracks are an example of a clue that some person in the future may claim a prescriptive easement, and seek to establish it formally through litigation.
 
buying farm  An area, or "farm," within a city that is earmarked by an investor for advertising, often by circular or mailer, to locate sellers who are interested in a for-sale-by-owner (FSBO) sale thereby saving on real estate sales commissions.  Agents "farm" for listings, investors "farm" for investments.

buy-out option  An option between partners that gives each the option to purchase the interest of the other.  Partners are co-owners of a business with equal rights, unless otherwise provided in their agreement.  A buy-out option is one way for partners to solve a problem that might otherwise require court action.  See also right of first refusal.

buy time  To stall for more time, often through a course of action  that other parties in the transaction are led to believe have some other and more important (to them)  objective.

by-laws  A written set of rules and regulations governing the operation of an organization, such as a condominium association.  By-laws are secondary only to the article of incorporation that create a corporation.  By-laws govern existing condo owners as well as future purchasers who take subject to all existing rules and regulations of their homeowner’s associations.

BYWOB  A buyer without a broker.