California Land Title Association (CLTA) policy of title insurance A plain vanilla policy of title insurance that guarantees the insured that a proper search has been made of public records. Excluded from coverage are losses from such recurring problems as encroachments and boundary disputes. See American Land Title Association policy of title insurance.
callable loan Any real estate loan that can be accelerated at the option of the creditor at some time prior to the end of the original term. For example, a thirty-year loan may contain a call provision permitting the lender to accelerate the due date to fifteen years, at which time a balloon payment would be due. This provision is in contrast with other varieties of acceleration that are the result of some act, such as default, by the debtor.
can of worms A real estate deal that, once begun, evolves into a nightmare of problems. Litigation is often referred to as a “can of worms.”
cap A maximum, or lid, on how much either an interest rate or monthly payment may increase per interval in an adjustable rate or variable-rate mortgage. A cap on a monthly payment without a cap on the interest rate can result in negative amortization. See also adjustable rate mortgage.
cap-per-payment adjustment The maximum amount that a monthly payment on an adjustable-rate mortgage can change at any one adjustment time. Several maximum increases in succession can cause “payment shock,” an unanticipated impact on monthly payments. If a payment cap results in a monthly payment that is less than that necessary to pay the full amount of the increased interest, it will cause negative amortization.
capital gain The profit realized from the sale or exchange of a capital asset (i.e., generally a thing of value owned). In other words, the gain is the difference between (a) what was originally paid for the property (to buy or build) minus accumulated depreciation (in the case of investment property), plus accumulated costs of major improvements, and (b) its net sales price.
capital gains tax The income tax on capital gain. Capital gain is the difference between (1) what was originally paid for the property (to buy or to build) minus accumulated depreciation (in the case of investment property), plus accumulated costs of major improvements, and (2) its net sales price.
capitalization The process of converting an income stream into a capital value figure. It is accomplished by dividing net income by a selected capitalization rate (the rate of interest considered a reasonable return on the investment). The higher the cap rate, the lower the value of the investment. For example, if the annual net operating income of an apartment complex is $300,000, and if the cap rate is ten percent, the market value is $3 million. If the cap rate is fifteen percent, the market value is $2 million. Appraisers use capitalization rates in estimating the value of income properties, as do investors when evaluating potential purchases.
capitalization rate syn cap rate A measure of a property's overall return to an investor calculated by dividing the net operating income (the income after deducting for potential vacancies and collection losses as well as operating expenses) by the purchase price. The resulting figure is expressed as a percentage and provides a figure to compare similar properties situated in different locations.
cap rate syn capitalization rate See capitalization rate.
carryback mortgage A mortgage that is accepted, or "carried back," by a seller of real estate as part of the purchase price. It is a soft dollar loan by the seller because he has not loaned cash to the buyer. Usually a seller will accept a carryback second deed of trust to reduce the amount of cash that would otherwise be required as a down payment. Sometimes the entire price, except for the down payment, is carried back as a first priority deed of trust. A carryback mortgage is an example of so-called creative financing. Like any other mortgage, the loan actually is composed of a promissory note signed by the buyer secured by a deed of trust on the subject real property.
case citation A reference that identifies a legal case and indicates where it may be found in a reporter system that publishes opinions of appellate cases.
case-in-chief The case presented by each party in a trial. It includes calling witnesses and introducing into evidence documents, photographs, or whatever else is relevant to the issues in a trial.
case in equity A case in which the plaintiff seeks specific performance, an injunction, an accounting, dissolution of marriage, or other non-monetary relief because the remedy at law is inadequate or unavailable. The judge, alone, decides questions of facts as well as those of law.
case law All reported judicial decisions; the law that comes from judges’ opinions in lawsuits.
cashed out When investors in a syndication receive return of their
original investment from refinance proceeds. A happy event!
Their investment continues with one hundred percent leverage However,
their tax basis has been reduced and a future tax liability is assured.
cash-flow mortgage A mortgage on income property in which
the monthly constant is adjusted to equal the net cash flow, whether or
not the net cash flow is sufficient to cover interest and principal payments.
Often a lender will agree to a cash flow mortgage as part of the workout
of a problem loan. Negative amortization may be preferable to foreclosure.
cashes out When a seller receives his or her entire equity in cash.
cash sale When terms of sale are all cash to seller. The cash credited to seller is ordinarily used in large part to pay off all existing indebtedness. In a cash sale, the buyer ordinarily obtains purchase money financing.
cash throwoff See also spendable cash flow. The cash produced by an income producing property. It is net operating income (NOI) less debt service on the mortgage. No consideration is given to tax consequences in this calculation.
casualty insurance syn hazard insurance Insurance against loss from casualty, such as fire, lightening, or explosion. Real estate lenders require borrowers to carry casualty insurance to protect the collateral for the loans. Examples of perils, or sources of damage, that are covered by casualty insurance are fire, theft, smoke, storm and vandalism. Coverage is not identical in all policies. All-risk policies cover more than others, but none cover flood, earthquake, or nuclear accident damage without a special endorsement to the policy.
cause of action An existing right to seek and to receive judicial relief, assuming the factual allegations of the plaintiff are true.
caveat emptor Let the buyer beware. An outdated concept in today's real estate dealings, where sellers have specific responsibilities in their dealings with buyers, such as the statutory duty to disclose a wide variety of pertinent information.
CBD syn central business district See central business district.
CC&Rs syn covenants, conditions and restrictions See covenants, conditions and restrictions.
central business district, (CBD) The prime downtown area of a city. The CBD will command the highest commercial rent of the city unless the core area has deteriorated into a redevelopment area. Many planning decisions are based upon a policy to protect the CBD from deterioration, such as construction of a light rail system from the suburbs.
certificate of limited partnership A document that perfects a limited partnership when properly prepared and filed in a governmental department.
certificate of occupancy A certificate granted by a local government
when a structure is completed in compliance with all building codes and
applicable ordinances. A building cannot be occupied prior to issuance
of a certificate of occupancy.
certified mortgage banker, (CMB) See CMB.
certified property manager, (CPM) A designation awarded by the Institute of Real Estate Management to a person who successfully completes its series of coursed in real estate management.
certified residential banker, (CRB) See CRB. The designation CRB is awarded by the Realtors National Marketing Institute, which is an affiliate of the National Realtors Association.
certified residential specialist, (CRS) See CRS.
chain of title The chronological history of title to a parcel of real estate as revealed by examination of the official records of the county. The relevant portions of the chain of title will be referred to in an abstract of title prepared by an attorney or title company.
challenge (of juror) Any prospective trial juror may be challenged for cause if his or her bias or prejudice is indicated. Statutes also provide that prospective trial jurors may be challenged peremptorily for any reason other than their race or gender. The decision to exclude a juror for cause is made by the judge; the decision to exclude a juror peremptorily is made by a party acting through his or her attorney. Peremptory challenges are limited in number.
Chapter 7 bankruptcy Voluntary or involuntary proceeding (also
called straight bankruptcy) whereby a debtor surrenders all property, excluding
certain exempt property, to the court for liquidation. Proceeds are
distributed to creditors and most debts are discharged.
Chapter 11 reorganization A bankruptcy proceeding designed to
fend off creditors to give a debtor time to reorganize and work out of
an insolvent position. A real estate debtor who files for Chapter
11 bankruptcy protection from creditors is entitles to suspend foreclosure
proceedings until the trustee in bankruptcy otherwise orders.
Chapter 13 adjustment of debts Bankruptcy court-approved plan whereby an individual or a small business is shielded against involuntary bankruptcy while unsecured creditors receive at least as much as they would in Chapter 7 liquidation bankruptcy. Payments are normally made over a period of up to three years, but no longer than five years.
cherrypick To select the best. For example, a multi-project syndicator might cherrypick his best projects to be retained and walk away from the less desirable deals. Under blanket mortgages, trustors cherrypick by obtaining releases of the prime parcels leaving the remainder parcels subject to foreclosure. To avoid this result, lenders often charge premiums for early releases from blanket mortgages thereby recapturing most of their capital before the last (and least desirable) parcels are released.
citation An abbreviation that refers to the written decision of a published appellate court case, usually including its name, volume and page numbers, and year of publication.
clear title A title to real property that is without defects or claims, except those which the buyer has agreed to accept, such as covenants, conditions, and restrictions of record. Sometimes clear title is used as a synonym to free and clear title, which is ownership without any mortgage debt.
close syn close of escrow, (COE), settlement, and passing Complete. Close often refers to close of escrow, but it also may mean the completion of a pending series of negotiations or transactions. For example, "Let's close that deal and move on to greener pastures."
close corporation A corporation whose stock is owned by one person or very few persons. Also known as a closely held corporation or a family corporation.
close of escrow, (COE) syn settlement, close, and passing The final settlement between a buyer and seller of real estate. The title passes to the buyer on recordation of the deed, which is a part of closing. Closing is the execution of the sales agreement. Close of escrow also occurs in a loan escrow when funds are disbursed and the financing documents are recorded.
closed-end mortgage A mortgage or deed of trust that secures only the original amount advanced, and specifically does not secure any further advances on the loan.
closing costs The fees and costs that must be paid by the parties
to an escrow prior to close. In typical real estate sale, closing
costs include recording fees, loan origination fees, credit report changes,
title insurance, taxes, and so forth. The Real Estate Settlement
Procedures Act (RESPA) requires that information regarding closing costs
by provided to the parties to the escrow before they become legally obligated
consumer transactions.
closing statement A financial statement given to the buyer and
the seller at close of escrow. It accounts for economic values but
does not reveal the actual receipt or disbursement of funds. Prorations
appear in the closing statement but not who paid the allocated costs.
cloud on title Any document of record that shows another person's potential claim to some interest in the owner's property. Unless otherwise agreed (which rarely occurs), the seller of real property is obligated to deliver a marketable title to the buyer. The preliminary title report may turn up documents that constitute a cloud on the owner's title. The owner then has the obligations to clear the cloud on the title, which is typically done by obtaining a quitclaim deed from the person whose claim of interest appears on the record. For example, an owner of property might have been sued at some earlier occasion. A lis pendens may have been recorded. Although that litigation may have long since ended, the record may never have been cleared. The owner, facing certain time locating the earlier plaintiff in order to obtain a quitclaim deed. For this reason prospective sellers are well advised to investigate their title before committing to a sale.Various types of clouds may appear, such as: an old installment sale contract on which the buyer has long since defaulted, a prior option that was never exercised, an earlier deed of trust for which no deed of reconveyance has been recorded, an so on.
CLTA syn California Land Title Association See California Land Title Association.
cluster housing A residential land use featuring clusters of homes surrounded by open or green spaces.
CMA syn comparable market analysis The acronym for a comparable market analysis of residence. A CMA is not as comprehensive as an appraisal, but it does show a preliminary range of market values.
CMB syn Certified Mortgage Banker The designation CMB is awarded by the Mortgage Banker's Association.
CMO syn collateralized mortgage obligation See collateralized mortgage obligation.
COE syn close of escrow See close of escrow.
COFI 11th District Cost of Funds Index for ARMS
cold listing A listing obtained by an agent who telephones strangers, or knocks on strangers’ doors, asking if they would like to sell their home. Also used as a verb, “I was cold listing when the dog bit my thigh.”
collateral Property pledged as security for a debt. In real
estate loans, the real estate is collateral, that is, the real estate is
pledged as security for repayment of the debt. The document that
establishes such a pledge is the deed of trust, or mortgage.
collateral assignment agreement A contract that often appears
in a deed of trust or mortgage that requires the owner's acceptance of
notes, (secured by first priority deeds of trust), instead of cash, in
exchange for partial releases of the property which is to be secured by
the carryback mortgage. Without a collateral assignment agreement
a subdivider would be required to sell lots for cash, or mostly cash, to
be used to pay for
partial releases. Example: Landowner takes back a purchase-money
note secured by a first priority deed of trust for ninety percent of the
purchase price of the acreage. The purchaser/subdivider obtains the
release of one lot in exchange for the assignment to the original landowner
of the lot purchaser's note, which is secured by a first deed of trust
on the acquired lot. Without the release, the subdivider would be
unable to convey the lot free of the original landowner's mortgage.
The individual purchaser of the lot may have paid some cash down, but that
cash typically is diverted by the subdivider or sales organization.
The balance of the price of the lot, in the form of a note, is used by
the subdivider to release the lot.
The seller's incentive is increased price as compensation for
carrying most of his price in paper. The risk is that the ultimate
purchaser of each lot may default and the "marked-up" lot may well be worth
less than the note and deed of trust which had been assigned to the original
landowner. Because of the usually inflated original sales price and
the increased risk level, the seller and subdivider are virtually joint
venturers.
collateralized mortgage obligation, (CMO) A security issued by the Federal Home Loan Corporation, Freddie Mac, which is backed by mortgage loans. Proceeds from issuance of CMOs are used to purchase additional loans from mortgage lenders, giving them the cash to make new loans. See also secondary mortgage market.
color of title A claim to title that superficially appears to be good and valid, but is ultimately determined to be invalid, illegal, or improper. An example is a deed signed by an incompetent person. An adverse possessor cannot acquire ownership in the absence of color of title in some states.
commercial easement An easement in gross, such as a utility easement.
commercial zone A type of zoning that generally authorizes the development of commercial uses, such as retail shopping and professional services. See zoning.
commission A form of compensation for performing services. In real estate practice it customarily represents a percentage of the selling price (not the owner's equity) of real estate, or a percentage of the rental income in the case of a lease. The rate of commission is negotiable and is customarily paid on close of escrow.
commission rebate A rebate by an agent to either a buyer or seller following a transaction. Commission rebates must be disclosed to all interested parties, or they are unethical, if not illegal.
common areas Those areas of a condominium or co-op whose ownership
and use is shared by all occupants, such as recreation buildings, pools,
driveways, and flower beds.
common interest development (CID) A subdivision with a governing
board to manage such matters of common interest as design review, fire,
flood, earthquake and liability insurance relative to common areas, landscaping,
value preservation, etc. There is a body of statutory law defining
the powers and obligations of government boards, and the rights of owners
to participate in elections, to appeal from rulings, etc. The governing
board of a CID has the power to impose monthly fees upon all owners with
which to conduct its business. Unpaid monthly fees become a lien
upon the lot of the delinquent homeowner.
common stock Shares representing ownership in a business corporation. They have no contractual rate or amount of dividend payment but are usually coupled with the right to vote for directors.
community (shopping) center A shopping center, often enclosed, characterized by a discount or department store as anchor tenant, with a number of satellite stores. Site may be from 10 to 35 acres.
community plan A governmental plan specifying the development that may take place within a particular community or area. A land use plan, or development plan for a community.
community property All property received by a husband or wife during (but not before) their marriage other than by gift. Community property generally includes the earnings of each spouse during marriage. Community property is subject to the debts of both spouses, is under the equal control of each spouse, and it cannot be conveyed without the signature of both spouses. Eight states have detailed statutes regulating community property.
competitive market analysis Pricing information about recent sales of homes in a certain neighborhood. Prospective sellers use competitive market analyses as aids in setting asking prices.
comparative negligence Negligence of the plaintiff that does not bar recovery of damages but may reduce the amount of recovery proportionally.
complaint A document prepared by an attorney for the client which contains the allegations made by the plaintiff against the defendant for which some judicial relief is sought. Allegations are contentions and may, or may not, turn out to be accurate. A compliant may be verified, under which circumstances the plaintiff is taking an oath under penalty of perjury that the allegations are true...some times with the qualification that they are true to the plaintiff’s “information and belief.” Complaints often are not verified, and the plaintiff is essentially “throwing a plate of spaghetti at the wall to see if something sticks.” Either way, when the complaint is filed in the courthouse records, a lawsuit has commenced. When the complaint is joined with a summons, and the two documents are properly served upon the defendant, the court then has jurisdiction (power) over the defendant who must then take some defensive action or risk losing the case and the right to defend against it. Understanding a complaint is important for any manager who is considering the commencement of litigation. In one sense it signals a point of no (easy) return at which attorneys begin to take over the lives of the disputants.
complaint, civil A document filed by the plaintiff with the court and served on the defendant to inform her or him of the facts constituting an alleged cause of action.
compliance agreement An agreement by a borrower of a home mortgage (either purchase money or to refinance) to sign whatever is necessary in the future to correct clerical errors in the loan documentation that otherwise might impede the sale of the mortgage in the secondary mortgage market.
comps See comparable sales.
concurrent escrow instructions Instructions by all principals to an escrow authorizing the release or return of funds on deposit. When a real estate sale “falls through the cracks” a question may arise as to which principal (buyer, seller, or even agent) is entitled to deposits held by the escrow. Most escrow officers will not release the funds without concurrent instructions to do so. If such instructions are not forthcoming, the escrow has the option to interplead the parties and deposit the monies into court.
condemnation The exercise of the power of eminent domain; that
is, the taking of personal or real property for a public purpose.
Payment of "Just Compensation" is required by the U.S. Constitution.
Condemnation is a judicial process; and the owner whose real estate is
taken has the right to have market value set by a jury. Condemnation
is not the process of condemning unsafe properties. See also special
benefits; severance damage; partial taking; and inverse condemnation.
conditional use permit A permit to conduct activities on a parcel
of land not zoned for those types of activities. Zoning laws typically
set forth uses that may be conditionally granted if they are not detrimental
to public health and welfare and are compatible with the uses in surrounding
areas. An example is a permit for a recreational use (a tennis court)
in an agricultural zone.
condo syn condominium See condominium.
condominium syn condo A form of ownership characterized by separate individual ownership of the interiors of structures and joint ownership of areas and facilities used in common. Homeowners’ or management associations collect monthly assessments and maintain the common areas. There are residential, industrial, office, and other forms of condos, such as parking space condos. For example, a condo-hotel, usually in a resort area, sells rooms to individual investors who share in the benefits of ownership of the room as well as its use for a short period each year. A condo-marina includes ownership of a boat slip with ownership of a condominium. Many terms have been coined to describe various sorts of condos, for example, court home (condo with a courtyard); patio home (condo with a patio); garden home (condo with a garden); zero lot-line home (condos attached side-by-side); junior executive studio (condo of 500 square feet or less); townhouse (two level condo); villa (suburban condo); ranchownership (fractional ownership in a large ranch); condomaximum (large condo); seasoniums (timeshare for an entire season in a condo); vertical subdivision (multi-story condo); condohotel (ownership of a hotel room with use allowed for a few days each year); vacation license (a timeshare condo); and resort ownership (a timeshare condo).
conduit A fund of cash made available by a Wall Street Investment banking firm earmarked for mortgages to applicants whose credit rating has been blemished because of plant downsizing and layoffs. The loans are packaged into securities that are purchased by institutions such as pension funds.
conforming mortgage A mortgage loan that conforms with standards published by agencies in the secondary mortgage market. A conforming loan is readily marketable. See secondary mortgage market.
connection fees The money collected from a subdivider or builder for connection to a water or sewer system as a charge for such services. Connection fees partially fund capital improvements. Such fees as connection fees, park fees, drainage fees, and so forth, are part of the exactions paid by developers to fund various services.
Connie Mac A security collateralized with convention mortgages that are not guaranteed by any governmental agency. The term is a play on similar terms, Ginnie Mae and Freddie Mac.
consanguinity The degree of relationship of persons who are descended
from a common ancestor.
construction loan A loan to finance the construction of a building
or other improvements on a site. Loan disbursements are customarily
made in stages as the construction progresses. A construction loan
will ultimately be replaced with a take-out, or permanent loan, once the
construction is complete and the project is sold. A construction
loan is not a purchase money mortgage, and it is not protected by anti-deficiency
legislation, (the lender may be entitled to a deficiency judgment).
Some lenders will not make a construction loan until the borrower has secured
a commitment for a permanent loan. Such a commitment then insulates
the construction lender from risk.
constructive eviction Any serious disruption to a tenant’s quiet possession caused by or permitted by the landlord that amounts to a serious and continuous breach of the lease. The eviction occurs even though it was not intended by the landlord. Excessive noise, for example, can be a constructive eviction of either a residential or commercial tenant. A constructive eviction may terminate the lease and give the tenant legal remedies.
constructive knowledge syn notice Information one is charged by law with knowing, whether or not one actually knows it. For example, recordation of a document affecting a specific parcel of real property gives constructive notice to the world of its contents. No one can legally assert ignorance of the contents of that document. Actual knowledge, on the other hand, is information actually known by a person.
contingency syn contingency clause, escape clause, subject-to clause, and weasel clause Expressions that describe conditions obligation to purchase real property. They typically are part of the buyer’s offer. A typical contingency reads: “Subject to buyer’s obtaining financing of ninety percent of the purchase price at an interest rate not to exceed twelve percent with a thirty-year amortization.” If the buyer, after using reasonable effort, cannot obtain such financing, the condition is not fulfilled, and the buyer escapes without further responsibility under the contract. Subject to clauses that are too broad and afford too many escape routes to the buyer amount to a disguised option, and permit an unscrupulous buyer to tie up a seller’s property for extended periods without cost or penalty to the buyer. Thus, it is important that the deposit receipt state clearly the complete details underlying each contingency, the time limitations on their fulfillment, and the consequences of nonfulfillment.
contingency clause syn contingency, escape clause, subject-to clause, and weasel clause See contingency.
contingency fee A fixed percentage of the monetary recovery obtained by a lawyer for a client. It is agreed on in advance and accepted in full payment for services rendered. If the representation produces no recovery, no fee is due under the contingent-fee agreement.
contingency period The period of time in a purchase agreement
during which the buyer obtains financing, inspects and approves the premises,
or fulfills other agreed upon contingencies.
contingent liability An obligation that occurs after a contingency.
For example, a buyer may assume a mortgage, but the seller may not be able
to obtain a release from liability from the lender. If the new buyer
defaults, the lender will seek repayment from the seller, who was the original
borrower. The seller in such a transaction retains a contingent liability
following the sale.
contract An oral or written agreement between two or more parties that is enforceable in court. For example, an oral finder’s fee agreement is enforceable, but an agreement to sell real property must be in writing to be enforceable.
contract for deed syn land contract, and installment land contract A sales contract under which the seller retains ownership of the property for a number of years during which time the buyer makes monthly payments. The seller agrees to convey ownership by deed at some predetermined future date. Sellers sometimes erroneously believe such a method will result in a simplified foreclosure should the buyer default in the monthly payments. Buyers often prefer this method to avoid having to qualify for credit from a lending institution, and perhaps even to avoid making a down payment.
contract for sale syn purchase contract, marketing contract, and deposit receipt A contract between a buyer and seller of real estate that provides for close of escrow and conveyance of title within a short period of time, usually less than six months. The contract contains all the essential terms of the deal, including the obligation to pay a real estate commission, if applicable.
contract rate syn face rate and nominal rate See face rate.
contract zoning Zoning that is granted to a landowner in return for a contractual obligation to put the property to specified uses.
conventional loan A mortgage loan obtained from a private lender, such as a savings and loan, which has market-rate interest and is not insured by the Federal Housing Administration.
convertible mortgage A mortgage that, at the lender's option, may be converted into an equity interest in the property. They are popular during times of high interest rates when mortgage money is otherwise unobtainable or too expensive. In exchange for a lower initial interest rate on the loan, the lender demands the opportunity to share in ownership at a later date should the project in question prove profitable. Thus, while the project is being leased and is at most risk, the lender has a very conservative debt position, but also has the option to convert the debt into equity and share in the cash flow and appreciation generated by the property. The amount of equity demanded by the lender is called the equity-kicker.
convey syn grant A real estate word for transfer
of ownership. For example, “a conveyed, (or granted) Greenacre to
B in settlement of the lawsuit.” A deed reflects a conveyance of
an interest in real property.
cookie cutter housing Mass produced subdivision housing, that gives appearance of being stamped out of a "cookie cutter." See row houses.
cooperating broker Any real estate broker who acts as a subagent for the listing agent in locating a buyer. The cooperating buyer is paid a portion of the listing broker's commission, usually one-half.
cooperation A term in listing agreement that legally confers authority on the listing agent to add the seller's property to a multiple-listing service. The listing agent is said to "cooperate" with another agent, usually the selling agent, by agreeing to share the commission paid by the seller.
co-ownership syn cotenancy The ownership of property by two or more persons whose respective interests are undivided. Joint tenancy, tenancy-in-common, and community property are forms of co-ownership. Except for co-ownership between husband and wife (which is governed by family law), cotenancies can be terminated and the real estate divided (or sold) only by consent of the co-owners or by order of court rendered in an action for partition. Generally, co-owners are equally responsible for the obligations of ownership, and are equally entitled to its benefits.
corner influence The increases in value of a commercial lot due to its location at a corner.
corner influence table A statistical table used in estimating the additional value of a lot because of its location at the corner of a block.
corporate by-laws The administrative guidelines for running a corporation. They specify corporate officers and their duties, voting requirements, the place of business, and other fundamental business matters. Homeowners’ associations are governed by by-laws, as well as their articles of incorporation.
corporation A legal entity with rights of a human person, created by a compliance with applicable law for some designated purpose. A corporation may or may not seek profits. It is generally characterized by unlimited life, transferable shares, limited liability for owners, and centralized management.
cost approach In appraisal, one way to determine an estimate of the market value of improved property. The market data approach is used to determine the market value of the land. The cost of reproducing the improvements is then determined by referring to prices existing at the valuation date. This cost is then reduced by accrued depreciation to take into consideration the age of the property. The adjusted cost of reproduction is then added to the market value of the land to arrive at the estimated market value.
cotenancy syn co-ownership See co-ownership.
counselor of real estate, (CRE) See CRE.
counterclaim syn cross-complaint See cross-complaint.
court-annexed arbitration A type of nonbinding arbitration required by some courts before the parties may proceed to trial.
court deed A deed executed by a court official conveying title
to a purchaser following judicial foreclosure. Often called
a Sheriff’s Deed.
court of equity A term with historical significance and widespread
applicability to real estate law. A trial court is a "court of equity"
in land use issues when the appropriate remedy is an injunction, specific
performance, rescission, reformation, appointment of a receiver, partition,
foreclosure, expungement, appointment of a receiver, declaratory
judgment, or divorce. In each of these instances, a jury is not permitted,
which is the essential difference between a court of law and a court of
equity. Judges are considered better able to "do equity." This
outlook is thought to be true because cases “in equity" are typically more
complicated than other cases. Jury matters, such as damages
for mental suffering and lost profits are generally not allowable in equity
proceedings. See also judicial actions and remedies.
court trial Trial in which the disputed questions of fact are decided by a judge instead of by a jury. Court trials are less formal, less structured, and require less preparation by attorneys.
covenant not to compete A promise not to compete with another in the performance of some business activity withing a specified area for a specified time. Sometimes buyers demand such clauses primarily to create tax deductions when a part of the purchase price is allocated to the value of the promise.
covenant of quiet enjoyment An implied promise incident to a residential lease ensures the normal possession, use, and enjoyment of the premises by the resident. If the covenant is broken, a constructive eviction has occurred, giving the tenant various legal remedies. The covenant does not necessarily appear in the lease; it is implied by courts.
covenants, conditions, and restrictions, (CC&Rs) The limitations on the future use of real estate ordinarily established by a subdivider in order to guarantee uniformity of size of homes, placement, densities, and other important factors that tend to affect the value of the homes. CC&Rs are delineated in a document that is recorded and becomes part of the official records of the county where the real estate is located. CC&Rs are said to “run with the land” because they bind future purchasers of the lots.
covering your assets, (CYA) Any defensive strategy based upon
the theory in which real estate players behave as if all sellers are liars
and all buyers are thieves, that is, believe nothing at face value.
In recent years expansion of liability in business transactions has prompted
the widespread use of CYA (aka covering your ass) letters that attempt
to exculpate a person through a self-serving letter or memorandum.
CPM Certified Property Manager See Certified Property Manager.
CRB Certified Residential Broker See Certified Residential Broker.
CRE syn Counselor of Real Estate A member of the American Society of Real Estate Counselors (ASREC).
cream-puff borrower A borrower with the highest of credit ratings.
creative financing syn seller’s financing, all-inclusive note and deed, and wraparound mortgage See seller’s financing.
credit One’s ability to borrow money. Credit lenders take such factors into consideration as experience, credit history, current earnings, education, profession, and so forth.
credit ap syn credit application See credit application.
credit application syn credit ap A printed questionnaire used by lenders to obtain pertinent information from prospective borrowers about their credit worthiness. In commercial loan applications, creditors are likely to seek verification from copies of tax returns for previous years. In residential loan applications, creditors are likely to seek verification of income from employers and banking institutions. If residential borrowers are independent contractors, they also will be required to produce copies of prior years tax returns to substantiate their declared qualifying income.
credit lender A real estate lender that evaluates a loan application on the basis of the credit worthiness of the borrower. Most institutional lenders of home mortgages are credit lenders. Equity lenders focus upon the value of the collateral.
credit scoring Use of statistical model of borrower behavior to predict which applicants for mortgages will be most likely to fully perform their obligations. Factors include income, marital status, length of employment and so forth. Positive scores may prompt a lender to waive their debt to income ratio requirement.
cross-complaint syn counterclaim A document used by a defendant to initiate litigation against the plaintiff or some third party. It is identical in all respects to a complaint, except that it is initiated by a defendant instead of by a plaintiff.
CRS syn Certified Residential Specialist The designation CRS is awarded by the Realtors National Marketing Institute.
CRV syn certificate of reasonable value See certificate of reasonable value.
cubage The total interior space of a structure expressed in cubic feet.
cul-de-sac A dead end street with a turnaround circle. Cul-de-sacs reduce traffic on through streets, and create more interesting subdivision patterns, but create odd shaped lots.
curable depreciation Decline in value that can be corrected at a cost that is less than the value that will be added to the structure.
curb appeal The visual appeal of a home when viewed from the street.
cure a default To bring current any past due payments of rent or of monthly payments on a home-purchase mortgage, or to correct any other default, such as by removing a dog from rented premises where they are prohibited.
custom-built house A unique dwelling unlike a tract house. Custom homes may be located in subdivisions of custom homes, or on acreage.
cut-rate financing syn discount financing The below-market financing offered by sellers of new homes as a sales inducement. Market-rate interest is "bought down" by the seller, who pays a lump sum to the lender in exchange for the favorable rate. The amount of the buy-down is then added to the price of the house. This practice is falling into disfavor because it results in overpriced or over-valued houses that, in the event of foreclosure, will not return the unpaid balance to the lender. Or, in the case of a resale, the seller may have to sell at a loss. See also three-two-one buydown.
CYA covering your assets An acronym used widely as a euphemism for “cover your ass.”
cybertecture A word coined as the result of development of the "smart" house which is wired to integrate power and telecommunications into one computer directed system. The word cybertecture refers to the technology, a combination of cybernetic computer control and architectural design.