[E]

early payoff mortgage  syn  fifteen year mortgage  See early payoff mortgage.

earnest money  syn  deposit, binder, and good faith money  The risk money accompanying a prospective buyer’s offer to purchase real estate (called a deposit receipt).  The earnest money is usually applied to the purchase price on the close of escrow.  It serves as an indication of the prospective buyer's ability to obtain a mortgage loan, the sincerity of the offeror, and the amount of risk the prospective buyer is willing to balance against the risk the seller assumes in tying up the property by accepting the offer.  Because it should represent something of value exposed to risk of loss, a personal check (especially if it is to be held uncashed), or promissory note customarily is accepted only in extraordinary situations.  Cash, a cashier's check or a money order is usually used as earnest money.  The earnest money is usually made forfeitable should the prospective buyer wrongfully fail to complete the purchase.  The earnest money usually is held pending the close of escrow by either an intermediary broker or a title company.  However, many sellers insist on holding the earnest money in order to avoid the problems of retrieving it if the escrow fails to close.  Buyers may use contingencies, or weasel clauses, to avoid loss of their earnest money.  See also liquidated damages clause.

easement  A property right to use the real property of another.  There are two categories of easement:  l)  easements appurtenant and 2) easements in gross.  The former “belong” to  dominant tenements (contiguous parcels of real property that are “benefitted by the easement) and “run with the land” (regardless of new owners who may acquire the benefitted property).  For example, assume that an easement of access over Greenacre benefits Blackacre.  Blackacre, the dominant tenement, may be conveyed for any reason, and its new owner would be able too enforce the right of access over Greenacre .. even if nothing was mentioned in the deed or other documents underlying the conveyance.  On the other hand, easements in gross “belong” to a person when created, and do not run with the land because no land is “benefitted.”  For example, utility companies obtain easements to maintain their pipelines and wires.  The benefit of the easement in gross resides upon a person (the entity)and therefore does not run with the land of any benefitted parcel.  The parcel burdened by either an easement appurtenant or in gross remains burdened until the easement is extinguished.   See also license.

easement by implication  An easement established by court judgment based upon circumstances in which necessity and public policy commands such a result, as when a parcel otherwise would be landlocked.

easement by prescription  An easement formally established by court judgment based upon a long-continued non-permissive use of a landowner’s property by a third person.  Most easements by prescriptions are rights-of-way.

echo house  syn  granny flat  See granny flat.

economic cloud on title  See also cloud on title.  Any law that regulated the transfer of title to property.  For example, home equity laws protect sellers of owner-occupied homes that are in default.  There is a right of rescission for pre-foreclosure sales.  The right of rescission by the seller   creates an economic “cloud” that makes title insurance or marketable title difficult to obtain for such purchasers.  The right of redemption following judicial foreclosure also is an example of an economic cloud on title.

economic life  In appraisal, the period over which an improved property will yield a return on the investment over and above the economic rent attributable to the bare land.

economic rent  In appraisal, the rent that theoretically could be produced by the subject property in the subject market. It does not mean the actual rent produced.  Actual rent is called contract rent; it may be less than economic rent where, for example, management is ineffective.  Appraisers are more concerned with what the rent ought to be rather than what it actually is under existing management.

effective gross rent  In appraisal, gross possible rent less an allowance for vacancy and bad debts.

efficient and procuring cause  The framework used to determine if an agent is entitled to a commission under a non-exclusive listing.  The agent is required to be the procuring cause of the completed transaction and the services he performed must have been the effective cause for bringing the transaction about. Conflicts arise when, for example, one agent “finds” a prospect yet another agent claims to have persuaded the prospect to make the deal.

EIR  syn  environmental impact report  See environmental impact report.

elastic mortgage  A type of mortgage that guarantees the borrower a constant monthly payment even though the contract interest rate may go up or down over the life of the loan.  The typical fifteen-year term of the loan is automatically extended if interest rates increase, or it is shortened if interest rates decrease.  This feature is called an elastic term.  The lender computes an "internal" interest rate indexed to a U.S. Treasury Bond index and ultimately collects that market rate of interest through the extensions of the original term of the loan.  The advantage to the borrower is that he avoids payment shock from unexpected increases in the monthly payments.  On the down side, the loan could amortize so slowly as to seem perpetual.  Furthermore, the monthly payments are very high because the initial term is short, usually only fifteen years, although it may vary from lender to lender.  See also adjustable-rate mortgage.

eleventh hour  A brief period of time immediately prior to an important event, such as a day or so before close of escrow or a few days before trial date.  Many lawsuits are settled "on the courthouse steps" at the eleventh hour.  Or, at the last minute. Sometimes a sales agent may choose to forfeit  part of his commission in order to permit a transaction to close, or an attorney’s client may accept a smaller settlement to avoid trial.  There are many psychological forces at play during the eleventh hour.

eligibility  A person's status, as qualified or not, for various governmental loan programs.  See also debt-to-income ratio.

emblement  A growing crop as distinguished from wild vegetation.  A crop is produced through labor.  Emblements are personal property, even prior to harvest, unless otherwise agreed.  Therefore, they are subject to the rules of the Uniform Commercial Code as adopted by the respective states.

eminent domain  The power of government to take private property for public use, welfare, and necessity.  The acquisition is accomplished through condemnation, a judicial proceeding.  The U.S. Constitution provides that no private property can be taken for a public purpose without the payment of "Just Compensation," that is, market value.  However, government can regulate the use of private property without the payment of market value through the exercise of its police power.  Zoning laws are an example of such police power.  Furthermore, government can require developers to dedicate private property as a condition of the development.  These “exactions” are not a “taking” within the Constitutional protection that requires payment of Just Compensation.  In a nutshell, zoning that permits some use of real property is not a “taking.”  Zoning that prohibits all reasonable uses of property is a taking.

empty nester  Parents who continue to live in a family home although their children have grown and gone.

encroachment  The nonconsensual extension of an improvement, such as a building or fence, onto the land of another owner.  It is a variety of trespass characterized by a permanent and physical act.

encumber  To commit an ownership interest in real property as security for the performance of some act, usually the payment of a mortgage loan.

encumbrance  A broad term describing virtually any recorded claim to the ownership or possession of a specific parcel of real property.  Examples include a deed of trust, mechanic’s lien, judgment lien, and lis pendens.  Covenants, conditions, and restrictions, as well as easements and encroachments are also often referred to as encumbrances.

end loan  A residential loan to the ultimate purchaser in a subdivision.  An end loan may have been preceded by a land loan, a development loan, and a construction loan.  An end loan is a permanent, or loan term loan.

entertainment-based retail center   A retail center that includes mixed-uses of entertainment (e.g., ice skating, movies, cultural and sporting events, arcades, and casinos), and restaurants.  Typically located in a central business district (CBD) to revitalize and recapture the style of a city’s downtown.

entitlement process  The entire process through which local government regulates future development.

entrepreneur  Anyone who assumes a risk of loss in exchange for the possibility of profit.  Examples in real estate are promoters, developers, builders, real estate brokers, and bird dogs.

entry-level market  First-time buyers.  Condominiums are often a large part of the entry-level market.  Entry-level homes are price sensitive because first-time buyers tend to be budget conscious.

environmental impact report, (EIR)  A written assessment of all the impacts a proposed project might have on its environment, together with an evaluative commentary and curative suggestions.  It is required by state laws as well as by the National Environmental Policy Act (NEPA).

EOV  Estimate of value  An estimate of value is less formal and precise than an appraisal.  It usually is made by sales agents who preview a home that has been listed for sale by a brokerage firm.  The EOVs of the visiting agents are shown to the homeowner who often then is persuaded to reduce his or her asking price.

equitable mortgage  A deed that is used as a mortgage.  Some lenders have been known to require a deed as security for a loan.  They erroneously believe that upon any default, the deed can simply be recorded and strict foreclosure thereby accomplished.  However, because the deed was used essentially as a mortgage, courts will treat it as an "equitable" mortgage and grant the debtor his usual rights of reinstatement and redemption.

equitable owner  An owner who has possession and use of the property although someone else may retain the legal title.

equity  The difference between the market value of a property and the unpaid balance of all debts secured by liens on it.  See also court of equity.

equity buildup  The difference between the original amount of a real estate loan and its current unpaid balance.  That is, it is the sum of all the principal payments made on a real estate loan.  Each principal payment increases the owner's equity in the property.  Equity buildup is not taxed.

equity kicker  A percentage of the gross receipts or proceeds of a future sale, demanded by a lender as a term in a mortgage.  Instead of a higher interest rate, the lender accepts a percentage interest in the ownership of the project, that is, an equity kicker.  See also convertible mortgage.

equity lender  Any real estate lender that evaluates a loan application principally on the basis of the value of the real estate proffered as security for the loan.  Many sellers of real estate accept non-recourse carryback mortgages based upon the value of the real estate rather than the credit worthiness of the buyer/debtor.  Many institutional lenders also make non-recourse loans.

equity-purchase laws  syn  home equity laws  Statutory laws designed to protect sellers of residential property who sell to unscrupulous buyers at very low prices just before foreclosure sale.  Among other features is a two year rescission period during which time the seller may set aside the sale and recover his home.  This right to rescind is an economic cloud on title.

equity-sharing  An arrangement in which a lender, in addition to interest, also receives a percentage of the appreciation in exchange for making the loan.  That is, the lender shares in the long-term appreciation of the project.  Equity-sharing is also called ownership by co-purchasers.  The investor puts up all or part of a downpayment,  pays all or part of monthly carrying costs on a residence occupied by the co-purchaser, who is often a related first-time home buyer.  The resident pays monthly rent to the equity investor based on the relative shares of ownership.  The equity investor obtains the tax benefits as well as a share of the equity buildup and appreciation.

equity skimming  A scam in which an unscrupulous operator obtains possession of residential property, such as a condominium, by purchasing with no money down.  The operator then rents out the property for months while making no payments on the purchase price.  Ultimately a lender, or the original seller, will foreclose and obtain possession and the operator will move on to other scams.

escalator clause  A clause typically found in a long-term lease that increases the rent over time.  The rent may escalate as property taxes and insurance increase.  Even residential rent increases may be tied to price indexes, and thereby escalate.  In adjustable-rate mortgages, the interest rate escalates.  Leases with rent tied to expenses are called expense-participating leases.

escape clause  syn  contingency,  contingency clause,  subject-to clause,  and weasel clause  See contingency.

escrow  A process whereby a disinterested third party, for example, a title or escrow company, accepts written instructions from parties to a transaction and delivers held funds and documents in strict compliance with these instructions on close of escrow.
 Escrow closes when the appropriate documents are recorded and delivered and the funds are disbursed.  Before the close of escrow, the escrow or title company may perform such ancillary services as computation of prorations and preparation of deeds, notes, and the like.  For example, in a typical real estate sales transaction, the seller expects to receive some cash, a note for the balance of the price secured by a deed of trust, as well as a deed of reconveyance and cancellation of the note to his lender (who is being paid off with the proceeds of this sale).  The buyer expects to receive a grant deed to the property from seller and money from his lender with which to pay the price.  The buyer's lender demands a note in the amount of the loan secured by a deed of trust with first priority.  And so on.  Clearly, if all interested persons sat around a table and attempted to consummate even such a simple sale, confusion might well be rampant, especially since each participant expects simultaneous giving and receiving.  The escrow process makes it possible for all the transactions to be executed simultaneously.
 An escrow or title company has a duty to comply with its instructions.  It has no duty to reveal to any participant that he or she is in the process of making a bad deal.  The rationale is that the escrow company isn't paid for advice.  However, most escrow and title company personnel have superior knowledge and expertise and become aware of peculiar transactions while in progress.
 "Escrow" is commonly used both as a noun and a verb.  For example, “We finally got the escrow closed.”  Or, “Let's escrow the deal.”  Title companies frequently blend escrow service with the service of selling title insurance.  The fee of one and the premium of the other also may become blended and constitute a major portion of the closing costs.  See also closing costs.

escrow account  See impound account.

escrow agent  A disinterested third party person or entity who acts as a special agent to perform specified services for principals to a transaction.  See escrow.

escrow assignment loan  syn  assignment loan  See assignment loan.

escrow company  A company in the escrow business.

escrow for deed  An escrow, the purpose of which is to hold a deed in suspense until the purchaser has made a requisite number of payments called for in a contract for deed.  An escrow for deed may not close for many years.

estate for years  syn  tenancy for years  See tenancy for years.

estates in land  The word “estates” refers to ownership interests.  Two traditional categories of ownership exist: so-called freehold estates and nonfreehold estates.  The former are fee simple estates and life estates, the latter are leasehold estates.  The terms freehold and nonfreehold are not in common use, though they are found in all real estate literature.  Modern usage usually includes only fee simple estates, life estates, and leasehold estates.  Most real estate is owned in fee simple, also called in fee simple absolute, or merely, in “fee.”

estoppel certificate  A document typically used when a mortgage is assumed, which indicates the interest due and the unpaid principal.  It may be executed only by the creditor who, thereafter, is restricted from making any claims that are contrary to the certificate.  An estoppel certificate by a tenant contains important data about his lease.  Thus, a purchaser of a building can be assured of the income flow to be anticipated, the dates of possible future vacancies, and so forth.

ethics  Principles of human interaction governed by the general agreement of a particular group of participants.  What is ethical or "accepted" practice may differ from what is morally right or wrong.  Ethics are moral principles that ought to bind the other guy, or so it may seem in the wheeler-dealer world of real estate.  Unfortunately, many activities in real estate require minimal educational requirements, minimal capital requirements, and the potential of large profits.  These features put a strain on ethical constraints.  Professional organizations connected with real estate establish and enforce codes of ethics that are binding on their memberships.

Eurostyle kitchen design  A style of appliances designed for function rather than appearance.  Appliances are more shallow and are flush with cabinet depths creating a fitted look.  They are modular and can be fitted and stacked in many ways.  Unnecessary trim is eliminated to accommodate ease in cleaning.

evict  The act of evicting a tenant from rented premises.

eviction  The expulsion of a tenant or occupier from real estate.  Eviction may occur willingly following notice from the landlord or by court order following legal proceedings.  Constructive eviction may occur when a landlord fails to maintain his premises in a habitable condition or when warranties are violated.  Under such circumstances, the tenant may remain in possession and obtain monetary relief or may declare the tenancy ended and rightfully abandon the premises with appropriate credits against rent.

eviction, legal  The legal process by which landlords expel tenants who are in breach of their lease contracts.  Because eviction is considered a draconian remedy, legal proceedings to evict require prior notice to the tenant, who must be given opportunity to be heard in court.

eviction, wrongful  Any unlawful conduct by the landlord designed to evict a tenant for any reason.  An example is changing locks on doors.

evidence  Everything presented by disputing parties and witnesses that the “finder of fact” is entitled to consider in arriving at a determination of the facts.

exaction  A sum of money, or an improvement, a developer, as a condition of development, is required to give or do for the benefit of the public.  A developer, for example, may be required to widen streets and improve them with sidewalks.  As public funds become increasingly scarce, local governments increasingly tend to saddle developers with exactions.  However, it may be illegal for a government to require an exaction that does not bear some relationship to the development being saddled.  That is, a development on the west side of town cannot be saddled with improvements to a street on the east side of town.  An aggrieved developer’s remedy, when saddled with an improper exaction, is a court order (writ of mandate) to compel the government to desist.  However, due to the time value of money, especially in relation to real property development, some developers simply find it more expedient to accept the exaction.

exclusionary zoning  The practice of requiring large lots in subdivisions as well as extensive design requirements that raise house prices above the financial means of certain income groups.  It is also referred to as "snob zoning" because its effect is to exclude lower income homeowners.

exclusive-agency listing  syn  listing agreement  An employment contract between an owner of real estate and a real estate broker.  The owner agrees to pay a specified commission to the agent, if he or any other agent finds a buyer.  The agent agrees to use diligence in hunting for a buyer.  If the owner personally locates a buyer, however, no commission need be paid.  See also listing.

exclusive listing  syn  listing agreement  An employment contract between an owner of real estate and a real estate broker.  The owner agrees to pay a specified commission to the agent if a  buyer is located by anybody, even the owner.  The agent agrees to use diligence in hunting for a buyer.  Often the listing agent will multiple-list the property, and a  buyer will be located by some other agent.  The agents will divide the listing agent's commission.  See also listing.

exculpatory clause syn disclaimer and hold harmless clause  A contract provision intended to relieve one party from liability for certain specified acts or omissions.  For example, A and B agree that A shall not be liable for any injuries caused to B or his guests from the condition of premises B is leasing.  Exculpatory clauses can be enforceable although courts do not favor broad attempts to escape liability, especially by the party in a superior negotiating position.  One party to a contract sometimes accepts exposure to liability by agreeing to hold the other party harmless, that is, free from any losses.  Disclaimers and hold harmless clauses are an important topic at most negotiating tables.

executive suite operator  An operator who leases a large office space, and divides it into smaller offices for sublease to small businesses for use as their "executive suites."  Subtenants also receive telephone, secretarial and data processing services in exchange for premium rent.  Executive suite operators, being dependent upon premium rent subleases, are considered risky tenants by project owners.  However, in periods of high vacancies and rent commissions, executive suite operators are better tenants than no tenants.

exhaustion of administrative remedies  A procedural law to the effect that courts will not review decisions of administrative bodies (such as planning commissions and city councils) unless the aggrieved claimant first exhausts (applies for and is rejected) all remedies that are provided by the administrative body.

exit strategy  A plan how to exit (1) from involvement in business organizations, or (2) from business relationships, or (3) from equity ownership responsibilities, or (4) from debtors obligations, without violating tax or civil laws, while effectively preserving net worth or the proverbial “nest egg.”

expandable second  syn  line-of-credit mortgage  See line-of-credit mortgage.

expense-participating lease  A commercial lease with an escalator clause that calls for increased rent to offset increases in taxes and/or  operating expenses.  In multi-tenant properties, this clause provides for a proportional allocation of the increased costs to all tenants.  See also escalator clause.  In all but net leases, commercial tenants pay pro-rata shares of operating expenses as well as common area maintenance expenses (CAMs).

exposure  The possibility of a future liability or loss.  For example, a listing agent who fails to reveal a known defect in a subject property has exposure to the buyer.

express agreement  A written or verbal contract.  Some contracts are not expressed, but are implied from conduct.  They are called implied contracts.

extended coverage title insurance  The coverage added to a basic fire insurance policy for additional perils.  These usually include windstorm, hail, explosion, riot, riot attending strike, civic commotion, aircraft, vehicles, and smoke.