package mortgage A mortgage under which the collateral is both real and personal property. A package mortgage will often secure money spent for appliances that the new home buyer otherwise could not afford.
paired condo syn attached single-family home See attached single-family home.
panel D The inspection report required by the Federal Housing Authority in home loan packages.
panelized home A home in which major components, such as the floor, walls, and roof, are constructed or assembled in a factory and then shipped to a permanent lot or site for final assembly, and installation of plumbing and electrical wiring.
paper A promissory note. Usually paper in real estate transactions is secured by a deed of trust. A rule of thumb is that you should “buy with paper and sell for cash."
paper losses Tax losses from tax deductions that are allowable for non-cash expenditures. For example, if gross income is $100,000 and deductible cash expenditures are $80,000, and allowable depreciation is $25,000, there is a "paper" loss of $5,000 although there is a positive cash flow, or economic profit, of $20,000. A "paper" loss is a loss only in the paper in a tax return and has no relationship to an economic profit or loss.
paper profit Appreciation in value of real estate.
paralegal A person qualified to perform a wide range of legal tasks under the guidance of an attorney. See also “legal assistant.” Many, if not most legal services by large law firms are performed by paralegals or legal assistants. However, these semi-pros, by law, are not permitted to render these services in which they may excel on their own as independent contractors.
parol-evidence rule The rule that when contracting parties have put their complete agreement into writing, no prior or contemporaneous oral or written terms may be unilaterally added later to change the written contact, absent proof of fraud, mistake, or illegality.
partial deed of reconveyance A deed of reconveyance that reconveys a geographical part, but not all, of the collateral to the trustor (borrower) in exchange for a principal payment on the loan.
partially amortizing loan A real estate loan that, by its terms, will not be fully paid off at its due date at which time a balloon payment will be required. The purpose of this type of loan is to keep monthly loan payments lower than would be the case with a fully amortizing loan.
partial performance A legal rule that an oral contract that is unenforceable because of the Statute of Frauds, is nonetheless enforceable under certain circumstances. For example, an oral agreement to sell an interest in real property ordinarily is not enforceable. However, if the doctrine of partial performance is applicable, such an agreement is enforceable. In general, for such an oral agreement to be enforceable by a person claiming an interest in real property, there must be other evidence to substantiate the oral agreement, such as when possession has changed hands, and improvements have been made or part of the price paid. This rule is important to alert managers to guard against partial performance of an oral agreement by another person who might attempt to use “flexible” facts while “testilying” to obtain an undeserved property interest.
partial reconveyance The release of a portion of a property from the lien of a deed of trust in accordance with a partial release clause or agreement. The released parcel becomes free and clear of the mortgage on recordation of the “recon.” The technique is often used by large subdividers who require partial reconveyances as their subdivisions progress.
partial release clause A provision in a deed of trust permitting the release of portions of the encumbered property from the lien of the mortgage when certain conditions have been met, such as payments of specified amounts of the underlying debt. The clause most typically is found in blanket mortgages encumbering subdivision land. A pro-rata release clause provides for release of five percent of the real property upon payment of five percent of the unpaid balance of the loan.
participation mortgages Any financing that requires more than the payment of interest and thus participates in the equity or profits of the project. Lenders accept some risk with a borrower-friendly interest rate, in exchange for a share of potential benefits flowing from a project. One variety of participation mortgage calls for the lender to receive, in addition to a stated rate of interest, a percentage of any increase in gross income, or a percentage in all gross income, plus a substantial slice of any resale or refinancing proceeds. Another variety is the land-sale-leasehold loan. Here the lender purchases the land, leases it back to the owner, and makes a first priority leasehold loan. The lender also receives a percentage of the gross income, cash flow, and/or resale or refinancing proceeds. Usually a ground lease will be extinguished on future sale. The benefit to the developer may be one hundred percent financing. Another variety of participation mortgage is the convertible mortgage, which the lender may opt to convert into an equity position at a future time. (The amount of the unpaid balance becomes an equity interest upon conversion.) Another version is a straight joint venture, under which the lender puts up one hundred percent of the project costs and receives at least fifty percent of the ownership, plus a preferred return and debt payments. The developer has the advantage of a partner with "deep pockets" and complete financing, but sacrifices a major portion of the benefits of ownership.
participatory legal representation The futuristic idea that business clients participate personally in the day-to-day decisions made by their attorneys, and especially participate in establishing the terms of their underlying employment contracts (fee agreements, as referred to by most attorneys).
partition A legal action by a co-owner of an undivided interest in real property, (for example, a joint tenant) for the purpose of having a court divide the property and award a particular piece to each co-owner. If the property cannot rationally be divided, the court can order a sale. The proceeds then can be divided in accordance with the respective ownership interests. Partition is an expensive and usually unsatisfactory experience for co-owners.
passing syn close of escrow, (COE), close, and settlement See close of escrow, (COE).
patio home See condominium.
payee syn beneficiary The creditor to whom a secured note is made payable. An assignee does not become the payee following an assignment, although entitled to the payments.
payment shock A term used to describe the result of an increase in the monthly payment of a mortgage loan arising from an automatic escalation in a variable rate mortgage (VRM).
payor or maker syn trustor The debtor who has signed a note. In a secured loan, the payor/maker is also referred to as the trustor.
pay rate The rate at which the interest and principal are agreed to be paid on a loan, regardless of the rate at which the interest accrues. If the pay rate is less than the contract rate, negative amortization occurs because the low pay rate is inadequate to cover the interest accruing under the contract.
peaceable eviction An improper eviction technique by which a landlord surreptitiously enters the absent tenant’s apartment, removes the tenant’s belongings, and changes the locks to the unit. It is peaceable in the sense that no eye-to-eye confrontation takes place, as is the case in a forcible eviction.
percentage lease A lease of commercial property where the amount of rent is determined by the amount of business done by the tenant. Customarily, this is a percentage of the gross receipts with provision for a minimum rental.
performance bond A financial guarantee that a specified performance, such as construction of a park, will occur. If the bonded developer fails to perform, the bonding company must put up the funds necessary to complete the project.
performance deed of trust A deed of trust given to secure or guarantee the performance of some act other than the payment of money.
perjury Lying about material facts when testifying under oath.
permanent financing syn take-out financing See take-out financing.
permissive waste A tenants negligent failure to prevent damage to leased property. Permitting a leak to continue, furthering its damage, is an example. Permissive waste justifies legal action for damages and/or for eviction by the landlord.
PFA syn plucked from air appraisal See plucked from air appraisal.
phoney listing A listing by a homeowner at an inflated price simply to evaluate his potential equity by examining offers. Such an owner has no intention of selling. The disadvantages to agents include wasted time and effort and the appearance of a glut of housing on the market.
pie syn melon A large sum of money to be divided among a group of real estate operators. How shall we cut the pie?
piggyback loan A loan designed to help borrowers avoid the necessity of purchasing private mortgage insurance (PMI). Without a piggyback loan, borrowers must meet then-current down payment requirements (typically 20 percent) or purchase PMI. The piggyback loan provides an additional 10 to 15 percent of the purchase price to be used as down payment. The loan is a second priority loan of 10 to 15 percent which, when combined with additional cash from the buyer, equals the required 20 percent down payment. Because it is a second priority loan, the piggyback carries a higher rate of interest and a shorter term with, perhaps a balloon in a few years. Because interest on the piggyback is deductible while PMI is not, borrowers can still benefit although paying a higher interest rate.
pipeline A motivational concept that involves putting the beginning of a deal into one "end" of an imaginary "pipeline" each day and each day finding a deal ready to close at the other "end".
PIQ syn property in question. The PIQ refers to that parcel subject of a title search.
PITI syn Principal, Interest, Taxes and Insurance, which represent the four basic expenses of owning real property. Lenders qualify prospective borrowers upon their ability make monthly payments of PITI.
plain vanilla title policy The variety of title insurance policy that offers least protection to an insured homeowner. Many agents are referring to the CLTA variety of policy when using this expression.
plaintiff In trial, the person trying to recover money damages or other relief from a defendant.
planned development, (PD) A zoning designation that suspends all
otherwise applicable zoning requirements. For example, assume that
a commercial zone requires a 25-foot setback from the rear property line.
If the commercial zone is rezoned to commercial PD, the setback requirement
would be suspended and development could occur (assuming permission of
the governing body) within 25 feet. In some instances, a PD will
lead to creative and innovative site plans and developments because the
rigid rules standardized within zoning classifications are suspended.
On the other hand, sometimes planning personnel or local governing boards
will utilize the PD zone to impose onerous burdens and exactions on a given
development. In a traditional standardized zoning classification,
a developer need only meet the stated requirements of
the zone; however, once the zoning limitations are suspended, as by
PD designation, then the developer is subjected, theoretically, to whatever
demands may occur to the appropriate governing personnel. PDs are
especially dangerous to a developer who is planning more than one type
of land use within a single PD zone. Generally speaking, planners
love PDs.
planned unit development, (PUD) A combination zoning and land use control technique is use for subdivisions containing owner-occupied homes with common ownership areas. A homeowners' association controls common areas and enforces the usually extensive CC&R’s.
plat A map showing the dimensions of a subdivision together with the location of numbered lots, easements and streets.
pleadings The complaint of the plaintiff and answer of the defendant in a lawsuit.
pledged account mortgage, (PAM) A mortgage with monthly payments lower than necessary to fully amortize the loan, the difference being made up by monthly withdrawals from a pledged savings account. That is, the buyer must deposit a specified sum of cash in a pledged savings account. (The buyer cannot make withdrawals from the account.) In return, the buyer receives a low monthly payment rate. The lender makes up the difference between the payment and the amount necessary to amortize the fixed-interest-rate loan by making monthly withdrawals from the savings account. The buyer receives the advantages of a lower monthly payment and the interest from the savings account, but suffers the disadvantage of tying up a sum of cash.
plot plan A map of a property showing all the structures currently on the site and all the proposed structures and major improvements the owner or developer intends to develop. A plat plan is part of the documentation submitted to obtain a building permit.
plottage value The additional value created by a change in the highest and best use when two or more parcels are assembled.
plucked from air appraisal, (PFA) An agent's high estimate of market value done to convince an owner that he should list his property for sale with that agent.
plug To push or advertise. For example, an agent may plug his listing with other against by highlighting all the details of the house.
PMI private mortgage insurance See private mortgage insurance.
POA property owners' association. See homeowners' association.
pocket listing A listing improperly withheld from multiple listing service by a real estate agent who intends to receive payment for both listing and selling the property, which customarily is priced so attractively that a quick sale is assured.
points A charge made by a lender in partial consideration of making a loan. The charge is made to the borrower and paid in escrow. Computationally, one point is one percent, so a charge of five points to obtain a $150,000 loan is $7,500. Essentially, points are disguised interest paid once instead of over the lifetime of the loan. Points are treated as additional interest in computing the annualized percentage rate (APR).
pool of mortgages A group of mortgages "pooled" together by a lender so they can be sold to one of the buyers in the secondary mortgage market, such as the Government National Mortgage Association, (Ginnie Mae). Most pools contain a million dollar minimum amount of mortgage loans.
portfolio All of an investor's investments or all of a lender's loans. Some institutional lenders will make "portfolio loans" to preferred customers that do not conform to the underwriting requirements established by buyers in the secondary mortgage market because the loans will be retained as an investment by the lender.
portfolio income Dividends, interest income, royalties and gains from sales of real estate are called portfolio income, Under the Tax Reform Act of 1986, passive activity losses cannot be used to offset portfolio income. See also passive activity rule.
portfolio lender A lender of home-purchase mortgage funds that does not expect to sell its mortgages in the secondary mortgage market. Because such lenders keep their loans within their own portfolio of loans, they can be more flexible (liberal) in the terms of the loans they offer prospective home buyers.
portfolio loan Loans retained by primary lenders as distinguished
from loans sold in the secondary mortgage market. Mortgages that
will be kept in portfolio need not meet the standards of secondary mortgage
market purchasers of loans. All such nonconforming loans are kept
in portfolio.
positive cash flow The amount of cash a real estate investment
will produce each year after payment of all operating expenses and debt
service.
possession The legal right to occupy or to receive the rent from real property. In residential property, the occupant who resides there has physical possession. The owner who has the right to collect rent, has legal possession. If the owner resides on the property, he has physical possession as well.
possessory lien A lien that empowers a creditor to retain possession of the collateral until the debt is paid, or sold to the highest bidder in accordance with the law. Typically a mechanic has a possessory lien on the automobile that is repaired. On the other hand, an attorney does not have a possessory lien on the client’s files.
power center A shopping center, open air, characterized by at least one “big box” retail establishment, such as a KMart, Home Depot or Price Club. Power centers are smaller than regional malls but larger than neighborhood or community centers. Site may be from 15 to 100 acres.
power of attorney A document in writing whereby one person, the principal, authorizes another, called the attorney-in-fact, to act for him. The power of the attorney-in-fact is are determined by the express terms of the document; they are not implied except insofar as may be necessary to carry out the expressly granted powers. In real estate, a power of attorney may be useful for an absentee owner or an investor who lives abroad. A special power of attorney limits the authority of the attorney-in-fact to certain enumerated tasks. A general power of attorney delegates all powers of the principal except the power to vote and the power to make a Last Will.
power of sale A clause found in a mortgage or deed of trust that, upon a default in monthly payments, authorizes the creditor (mortgagee or beneficiary) to cause the collateral for the loan (i.e., the debtor’s home) to be sold to the highest bidder a a private sale. Without a power of sale clause, foreclosing creditors would be required to file a court action for foreclosure, a time-consuming and costly process, before the collateral could be sold.
PRE syn prelim and preliminary title report See preliminary title report.
precedents, doctrine of A court decision on a question of law that gives authority or direction on a similar question of law in a later case with similar facts.
preemption agreement syn right of first refusal See right of first refusal.
prelim syn PRE and preliminary title report See preliminary title report.
prefabricated home The same as a panelized home except that plumbing and electrical wiring are installed at the factory instead of at the permanent site.
preliminary (or tentative) subdivision map A subdivision design map submitted to city or county planning staff for preliminary recommendations.
preliminary title report, (PRE) syn prelim A document prepared by a title company that contains a summary of all pertinent documents that are recorded in the official records, as well as the current tax status, of a particular parcel of real estate. A copy of the assessor's parcel map is usually attached. The prelim is widely relied on as a summary of the title to real estate. Upon close of escrow, the prelim essentially becomes merged into the title insurance policy, with the summary of recorded documents being itemized as exceptions to coverage.
premium The cost of insurance for a specific policy period. The premium for a particular coverage customarily is determined by multiplying the coverage rate by the amount of coverage desired. For example, if the rate is $6 for every $1,000 of coverage, the annual premium is $600 for $100,000 of coverage. Premiums for title insurance are paid once for coverage as long as the property is owned. Casualty insurance premiums are payable periodically so long as coverage continues.
prepaid rent The rent is paid at the outset of a lease that covers periods of time at or near the end of the lease. Landlords prefer prepaid rent to compensate for any possible loss of rent pending eviction proceedings.
prepayment penalty The cash penalty for the payment of a mortgage debt prior to its due date. It is a lender’s charge to compensate for anticipated money losses due to the early payoff. The penalty is illegal if it is excessive or confiscatory. Prospective borrowers often negotiate for the right to prepay a mortgage loan without any penalty.
preponderance of evidence Standard of determining civil liability, that the weight of the evidence offered to prove a matter is more probable than not.
prescriptive easements Easements, usually of access, over the land of another person, created by a continuous, open (visible) use without the consent of the landowner for a long period of time, usually five years or more in most states.
present value The value today of a future receipt of money. If $1 will grow into $1.10 in one year (with interest at ten percent), then it can be said that $1 is the present value of $1.10 to be received one year in the future. The market value of a real estate investment may be thought of as the present value of the net economic benefits it will create over its life. The concept of present value is widely used in real estate investment.
pretrial proceeding In the months before a civil trial is scheduled to begin, several pretrial proceedings may occur. One type is a settlement conference attended by the attorneys, parties, and judge to determine if the case can be amicably settled without a trial. Another type is a conference attended by the attorneys and the judge to formalize the issues to be determined at trial and to decide whether to have a jury, among other matters.
price allocation An agreement by a seller and buyer in a commercial transaction as to what portion of the price is allocable to the land, to personal property, and to depreciable buildings. If the allocation is within reason, it will be accepted by the IRS.
price ladder A "stairway" of higher prices leading to higher quality homes.
price list leader An area of higher home prices.
price list loser An area of declining home prices.
pride of ownership An attitude toward real estate characterized by superior maintenance and repair. The attitude may be held by the owner, or by upscale tenants who collectively share a desire for highly maintained premises. Good guys come in last -- the results of pride of ownership often do not produce commensurately higher prices.
prime interest rate A calculated interest rate published widely in financial circles and referred to by business persons as a comparison basis for interest changes and trends. Historically, the prime rate was that rate commercial lenders charged their very best, or prime, corporate borrowers. In current times the prime rate is more fictional than factual, in that many borrowers obtain loans at less than the prime, many more a point or two over the so-called prime. Therefore, the prime rate has become known more as a benchmark rate.
prime tenant syn anchor tenant A major credit-worthy tenant in a commercial complex that occupies a substantial and prime area of the structure.
principal, interest, taxes and insurance, (PITI) See PITI.
principal lease syn head lease, main lease, master lease, original lease, and underwriting lease See master lease.
principle of anticipation In appraisal, a concept that the value
of a component is measured by the amount it contributes to market value,
not by its cost. Thus, an additional bedroom may cost $10,000 but
add only $5,000 to market value.
principle of change In appraisal, the principle that real estate
values are constantly changing. Thus, an appraisal must bear a certain
date to which the opinion of value pertains.
principle of increasing and decreasing returns In appraisal, the concept that the quality and quantity (size) of a project is determined by comparison of the cost and return of an added increment. For example, if an additional increment in quality (say, a water fountain) will not produce rent to offset its cost, it should not be produced. Likewise, if additional space in a common area would not produce rent to offset its cost, it will not be produced.
principle of substitution In appraisal, the principle that given two or more parcels of comparable utility, demand will be greatest for the least expensive.
priority of liens The preferential sequence of liens and encumbrances, which in property law is based on time. That is, the first lien or encumbrance to be recorded has priority over all subsequently recorded liens and encumbrances. The law of priority applies to almost all liens and encumbrances, such as mortgages, judgment liens, mechanic’s liens and homestead laws. Certain governmental liens and encumbrances, such as property tax liens, are not governed by the law of priority. Under the law of priority, all of the value of the secured real estate must first be applied to satisfy the lien with highest, or first, priority. If any value remains, it is applied then to satisfy the lien with second highest, or second, priority. Any remaining value is applied to any other junior liens in the same manner. After all recorded liens are satisfied, any additional value from the property belongs to the earliest unrecorded lienholder.
private mortgage insurance, (PMI) Mortgage insurance provided by private non-governmental companies to create marketability for conventional loans. See also secondary mortgage market.
private offering syn private placement A limited partnership offered, usually to 35 or less investors, for the purpose of obtaining exemption from Securities and Exchange and state registration laws required for public offerings.
private placement syn private offering See private offering.
probate properties Real estate that is for sale because of the death of its owner. Most real estate passes "through" probate and requires court confirmation of any sale, at which time the public may bid on the property. Some real estate on the market because of the owner's death does not require court confirmation, such as joint tenancy property interests.
procuring cause The efforts of a real estate agent that result in an offer to purchase real estate made by a ready, willing, and able buyer who completes the transaction. The concept of a procuring cause is applicable when the seller of real estate chooses to use an open variety of listing agreement. Under such circumstances, only the agent that is the procuring cause is entitled to the commission. See also open listing.
promissory note syn mortgage note The written evidence of a debt. A promissory note may be negotiable and is always assignable. A note should contain the name and signature of its maker/debtor, the name of its creditor/payee, the amount of the debt, an express promise to pay money, words of negotiability (i.e., “or order") when appropriate, the due date and/or amortization terms, the interest rate and payment schedule, the date drawn, whether it is prepayable or locked-in, whether or not it is secured, any penalty for tardy installments, any acceleration clause, and a provision concerning the reimbursement of legal fees and court costs (if any). A note is not a recordable document because it does not affect real property. If it is secured by a mortgage or deed of trust, the note cannot be negotiated, assigned, or transferred independent of the security, that is, the debt follows the security and vice versa, as a matter of law. Forms prepared by title companies are in general use as promissory notes.
property in question, (PIQ) See PIQ.
property management fee A fee paid by a limited partnership to
its general partner for management services. It is usually set as
a percentage of the gross income, perhaps four to six percent. Generally,
a property management fee includes compensation paid to any property manager.
However, it is not the compensation paid to an apartment manager living
on the premises.
property owners' association, (POA) syn homeowner’s association, (HOA) See homeowners' association, (HOA).
property profile A report of basic information concerning a property,
including the name of its owner, its legal description, and the names of
lienholders, if any.
property tax See ad valorem property tax.
property tax rate The factor that, when multiplied by the assessed value of a parcel of taxable real property, produces the amount of annual property tax its owner must pay. The factor is computed annually by local government officials who divide the county budget by the assessed value of all taxable real property in the county. As a rule of thumb, the factor may approximate 1.25 percent (.0125), which produces an annual tax of $1,875 on a home, for example, that is assessed at a value of $150,000 (.0125 x 150,000 = 1,875).
prospecting Hunting for customers. Agents use the term prospecting to describe business soliciting.
public report A report that informs prospective purchasers of a subdivision lot about on-site conditions and proposals that affect the value of the lot. The purpose is to ensure that the public is truthfully informed about important factors before committing any resources toward a purchase. It is required by the Subdivided Lands Act. Subdivisions processed through city planning are exempt.
PUD syn planned unit development See planned unit development.
puffing A relatively harmless exaggeration about a property by a salesperson to a prospective buyer. For example, this house has the grandest view of the valley and will make all your dreams of home ownership come true. Even if the buyer's decision to buy was based on such puffing, he does not have legal cause of action.
punitive (or exemplary) damages Amount awarded by a court, to the victim of an intentional tort, in addition to compensatory damages; designed to punish the tortfeasor and serve as an example to others.
purchase and leaseback A sale, usually of an income producing investment property, instantly following which the seller immediately leases back the entire property at a stipulated rent. The buyer obtains a certainty of income from the seller/lessee plus the tax advantages of ownership, which forms the basis for the transaction. The seller obtains cash from an immediate sale, hopefully favorable terms, and continues to occupy the project pending termination of the lease.
purchase contract syn deposit receipt, contract for sale, and marketing contract See contract for sale.
purchase lease-option A disguised lease-option. The attempt is to make a sale appear to be a lease with option to buy. The seller agrees to accept payments and to remain as record title owner, while the buyer-in-possession agrees to make periodic "lease" payments. Typically a grant deed is executed and placed in a holding escrow to hopefully eliminate problems arising from the future possibility of a remorseful seller. Payments are applied in whole or in part to the purchase price. Income tax laws apply to the reality of a transaction, however, not simply its form, and such a seller would be hard pressed to justify any depreciation deduction. In reality, the seller has a mortgage-in-fact and the buyer has an ownership interest at all times, not merely a leasehold.
purchase-money mortgage Any mortgage given by a purchaser to secure funds borrowed for the purchase of real property, or given to the seller as part of the purchase price of real property.
purchase-money second A carryback mortgage as part of seller's financing to a buyer. Buyers prefer carrybacks to minimize or avoid down payments as well as to avoid having to qualify for new loans. The popularized "no money down" idea capitalizes on the use of purchase-money seconds.
pyramiding The technique of buying properties, increasing their value through repair, and trading them for larger properties. Delayed, or “Starker” exchanges are often relied on if a direct trade is not immediately available. Trading is a key part of pyramiding to defer payment of capital gains taxes.