saddle An area or location that is prime in all respects or the center of business activity. Such a location may also be called a jewel of an area. “It’s a saddle property.” “It’s a jewel of a property.”
sale-leaseback A sale and simultaneous leaseback by the seller. The buyer immediately owns a fully occupied property at an agreed on total rent. Sale-leasebacks provide working capital for a seller and provide a steady, known return to a purchaser. However, a sale-leaseback may result in an inflated price to compensate the seller for the lease payments agreed to be paid.
salesmanship The technique of selling. In real estate, it
often involves the use of euphemisms to promote deals. For example,
a small house may be called a dollhouse, a cottage, or simply charming.
A house that is too large may be called gracious. A country lane
may mean a dirt road.
A water view will probably turn out to be a swamp, though the words
suggest a lake. A house is always called a home to create the image
of a happy place. Value is used instead of price whenever possible.
Initial investment is used instead of down payment. A purchase agreement
is considered less threatening than a sales contract. A mortgage
is called financing. And, some euphemistically call a commission
a marketing fee. The foregoing are all safe euphemisms. Whether
or not they are effective is another question.
salesperson A person licensed to perform real estate sales activities that are regulated by the state. Salespersons must operate under the supervision of real estate brokers.
sales price The gross price agreed to by a buyer and seller, without deductions for the sales commission or closing costs. It is referred to in the calculation of transfer taxes and in comparison sales analyses.
sandwiched trust deed A note and deed of trust on property owned by a limited partnership that secures the payment of compensation to the syndicate managers. It is sandwiched between the financing and the investors' equity.
sandwich lease A master lease. An owner of an income property
may choose to master lease the entire project to a third person, who then
becomes the landlord in respect to the existing tenants. The master
tenant collects the rents from the existing tenants and remits all or a
portion to the owner. The master tenant's lease is "sandwiched" between
the owner and the owner's former tenants. A sandwich lease usually
contains an option to purchase, because the master tenant usually intends
to improve the property to increase the rents and thereby improve the market
value of the project for a commensurate profit in the future.
Another variety of sandwich lease exists where a sublessee again
subleases to a tenant. The first subtenant's lease is sandwiched
between the original (or prime) lease and the second sublease.
satellite tenant A specialty retail store tenant in a regional shopping mall. Any secondary retail tenant.
satisfaction of judgment A document evidencing the fact that a judgment has been paid in full.
satisfaction of mortgage The payment of a mortgage in full. It is comparable to "burning the mortgage." See also deed of reconveyance.
savings and loan syn thrift A financial institution
that specializes in real estate financing. Real estate finance includes
making original loans, as well as buying and selling loans in the secondary
mortgage market.
Another variety of sandwich lease exists where a sublessee again
subleases to a tenant. The first subtenant's lease is sandwiched
between the original (or prime) lease and the second sublease.
scam Any transaction in real estate characterized by a large and quick profit obtained with a bare minimum of effort and capital. Often the term connotes an illegal or unethical means of obtaining the substantial profits. Any so-called Ponzi operation (where new investors' capital is treated as earnings on earlier investors' capital) is a scam. The term is often used as a verb, as for example: "He scammed his investors."
screening fee A charge made by landlords to prospective tenants to cover the cost of obtaining credit checks. The fee cannot exceed $30, and if charged, the copy of the credit report must be provided the applicant tenant. If no background check actually is obtained the fee must be refunded. California and many other states have large bodies of statutes governing the landlord/tenant relationship.
S corporation A closely held corporation that is treated as a partnership for federal tax purposes. Income is regarded as taxable personal income to the stockholders, whether distributed or retained in the business. One effect is avoidance of the customary double taxation of corporate net income.
secondary financing A loan secured by a second priority mortgage or second deed of trust on real estate. A seller's carryback mortgage often will be secondary, that is, the buyer will have obtained a first priority purchase money loan.
secondary mortgage market Buyers and sellers of existing mortgages. The effect of this market is to produce liquidity (cash) that is available to finance the primary mortgage market. Generally speaking, the market involves lenders, mortgage-backed securities issued by quasi-governmental agencies, and a variety of investors such as pension funds, insurance companies, and individuals. More than three-fourths of all residential mortgages are sold by thrifts in the secondary mortgage market. Historically, the original purchaser of mortgages was the Federal National Mortgage Association, or Fannie Mae. Lenders pool together mortgage loans they make in million dollar lots. These pools are sold to Fannie Mae for cash which provides the lenders with new money to lend again. Fannie Mae raises its money by issuing mortgage-backed securities to investors. Fannie Mae sets standards that must be met before it will purchase mortgages. Those standards are voluntary, but if lenders desire to sell their mortgages (and they do) they obviously must comply. Their compliance with these standards result in standardization within the lending industry, such as the standard requirement for mortgage insurance. Investors do not worry about foreclosure problems because mortgage insurance protects their investments. The Government National Mortgage Association, or Ginnie Mae, (a spin-off from Fannie Mae) issues "pass-through" securities to investors. Monthly payments of principal and interest are paid directly to the investors, whose investments also are insured against loss. They are called Ginnie Mae Certificates. The Federal Home Loan Corporation, or Freddie Mac, issues mortgage participation certificates, or PCs, which are backed by conventional loans (not insured by FHA or VA). It also issues collateralized mortgage obligations, or CMOs, to create investment packages that offer long, medium and short terms. Private investment companies also purchase mortgages in the secondary market, pool them and issue securities backed by the pool of mortgages. Investors are not required to collect monthly payments from the debtors in any of the mortgage securities. Loans are serviced (that is, payments collected) by companies in that business or by original lenders of the mortgage.
second mortgage A mortgage whose priority is junior to a first mortgage. It is also a more recently recorded mortgage than the first recorded mortgage. Usually a first priority mortgage is taken to purchase residential property or to develop commercial property. Second mortgages are more frequently taken as collateral for improvement loans, or a vacation to Mazatlan. See also priority.
second mortgage crank A deal in which a buyer obtains a first priority mortgage loan to buy property under the pretense that a cash down payment will be made to the seller, who actually agrees to accept a second mortgage or deed of trust for the down payment. The down payment otherwise required is "cranked" out in the form of a second deed of trust. The process is not proper if it involves a deceitful loan application to the lender of the purchase money mortgage.
securitization of real estate The concept that real estate finance may be treated similarly to other traditional securities through the issuance of highly transferable securities representing interests in large pools of mortgages. For example, the Federal Home Loan Mortgage Corporation (Freddie Mac) issues mortgage participation certificates, called PCs, which are securities available to investors who wish to participate in pools of mortgages. Such a passive investment in real estate is analogous to investment in other securities, for example, corporate bonds. See also REMIC.
security Something given, deposited, or pledged to make secure the fulfillment of an obligation or the payment of a debt. In mortgage financing, real estate is the security, or collateral.
security deposit The money collected by a landlord at the beginning of a tenancy: (1) as prepaid or advance rent (as when the last month's rent is collected in advance), (2) as security to cover the cost of any damages done by a tenant (something more than reasonable wear and tear), or (3) as money to be applied to the cleaning of the premises. Regardless of how such payments are designated in the rental agreement or lease, in some states, as a matter of law, they constitute security deposits. Within a short time following termination of the lease, the landlord must deliver to the former resident an accounting of security deposit monies, including an itemized list of how they were expended, and to the extent that there is any balance remaining, which then must be refunded. Unfortunately, there has been a long history of conflicts regarding disbursement of security deposits. Usually the landlord has the burden of proving the reasonableness of any moneys expended. In most states security deposits cannot be made automatically forfeitable for nonrefundable. A deposit, by its name, is not an advance payment for services; it is security only. Security deposits are common in commercial leases as well as in residential leases.
seed money syn front money The monies needed to defray initial expenses in organizing a project to be syndicated. Front money covers the cost of an option, preliminary architectural drawings, legal expenses, and similar items. Ordinarily front money is returned with investors' capital. Seed money is also the initial investment needed to determine the feasibility of any project.
see-through skyline A metropolitan skyline of buildings you can see through because they are partially or completely vacant. Vacant "Darth Vader" buildings do not contribute to such a skyline due to their dark windows.
self-employment tax, (FICA) A federal Social Security tax for self-employed persons, such as independent contractors.
self-help A common law rule that, under certain circumstances, a person can legally take action to resolve a problem without resort to a court or the legal system, for example, to trespass for the purpose of retrieving stolen property, or to tear down an encroaching fence. Generally, self-help is no longer a lawful remedy; aggrieved persons must resort to the processes of law to resolve problems.
seller financing syn creative financing, all-inclusive note and deed, and wraparound mortgage Any loan from a seller to a buyer of real estate as part of the purchase price. It is a soft-money transaction that is always used in "nothing-down" transactions. Seller financing is common in both residential and commercial real estate transactions. See also carryback mortgage and purchase-money second.
seller's market A market when demand exceeds the supply of available real estate.
seller's remorse A creeping feeling that maybe the sale should not have been made. Usually seller's remorse occurs after a contract to sell has been finalized, but before escrow has closed. A seller with a strong case of remorse may attempt to rescind the transaction based on a tardy close of escrow or other supposed default by the buyer. Seller's remorse is maximized when a second prospective buyer indicates he would have been willing to pay a higher price.
selling agent A licensee who locates a buyer, even though he did not obtain the listing from the seller. Many selling agents work through multiple listing services and customarily receive 50 percent of the total commission paid by the seller to the listing broker. The selling agent is the "cooperating" agent. See also cooperation.
Senior Real Estate Analyst, (SREA) See SREA.
Senior Residential Appraiser, (SRA) See SRA.
senior mortgage A mortgage that was recorded prior to recordation of a junior mortgage. See also priority.
senior real property appraiser, (SRPA) See SRPA.
senior right of way agent, (SR/WA) See SR/WA.
separate property In community property states, property that was acquired before marriage or by gift (a living gift or inheritance) during marriage. Separate property is unaffected by divorce. Community property is property acquired during marriage other than by gift and is owned equally by the spouses. Usually each spouse receives his one-half of the community property on divorce, and retains his separate property.
separation The status of spouses who are lawfully living apart, without cohabitation.
servicing The collection of interest and principal payments and such items as fire insurance, taxes, and so forth, in accordance with the terms of a real estate loan. Servicing also requires responsibility for accounting, bookkeeping, insurance, tax records, loan payments follow-up, delinquent payments follow-up, and loan analysis. Organizations that perform these services are paid a servicing fee.Some beneficiaries service their own mortgages, most do not.
servicing rights The contractual right to service mortgage loans, i.e., collect monthly mortgage payments from mortgage borrowers. The mortgages of homeowners often are transferred to loan servicing companies. The borrower, once notified of such a transfer, must comply by forwarding monthly payments to the transferee (assignee).
settlement syn close of escrow, (COE), close, and passing See close of escrow, (COE).
severance damage In condemnation, the damages caused to a remaining parcel following a partial taking of property. For example, a freeway splitting a farm is a partial taking. The remainder parcels on each side of the freeway, may have been damaged by, for example, suffering a reduced highest and best use from multifamily to single family residential. The payment of Just Compensation, as required by the U.S. Constitution, requires that the landowner be paid for such reduction in value, which is called severance damage. Sometimes there are benefits that offset the severance damage, as, for example, when an interchange on the freeway funnels an increased number of vehicles onto the landowner's property, adding to the value of the remainder parcels. Special benefits can offset severance damages, but not the value of the “take.”
shakeout Bad financial times in some segment of the real estate market. At times when there is a shakeout of one market segment, e.g., office development, other segments may boom. During a shakeout, marginal (under-financed) operators "go under," (Chapter ll, flurry of lawsuits, or abandonment) or shift gears to alternative market segments.
shared appreciation loan for seniors See reverse-annuity mortgage.
shared tenant services, (STS) syn smart office building,
intelligent building, and telecommunications enhanced real estate,
(TERE) See smart office building.
shell lease A lease arrangement under which the tenant rents the shell of a building and agrees to complete its interior construction.
sheriff's deed A deed, signed by an official (because the debtor likely won’t cooperate) used to convey real property to the high bidder following a forced sale to satisfy a judgment lien.
sheriff's sale A forced sale. The net proceeds of the sale are used to satisfy the debtor's unpaid debt. A sheriff will issue a sheriff's deed to convey ownership to the real estate. The authority for a sheriff's sale comes from a writ of execution issued following a court judgment.
shopper A real estate player who shops for mortgage money by making multiple applications, or by playing one lender against another, all for the purpose of obtaining the very best mortgage possible. Sometimes risky loans are shopped in search of any lender willing to accept a marginal package. Application fees prevent shopping for firm commitments.
shortfall A lack of new rental units to adequately meet demand.
short-form lease syn skeleton lease, and memorandum of lease A memorandum that contains only minimum information, such as the lease term and the existence of any option to renew. It is recorded to protect its priority. Since recordation of the entire lease would reveal the rent and other confidential details, only the "bare bones" of the deal are contained in a short-form or "skeleton" lease. Similarly, a memorandum of option is recorded to protect its priority and to conceal the complete terms of the option.
short-fuse mortgage A balloon-payment loan. Any real estate loan calling for payment of the unpaid balance in just a few years is considered a short-fuse mortgage. These loans may be amortized over a long period of time, with a reasonable monthly payment, but they remain dangerous to the borrower because of their early balloon payment-"short-fuse" feature. Upon the due date, the borrower will be required to either pay the balloon, refinance it with another loan, or lose the property in foreclosure.
short sale The sale of a home for less that the unpaid balance of its mortgage loan. Because the lender will receive less than the amount it is owed upon close of the sale escrow, its consent to a short sale must be obtained. Lenders will sometimes give consent to accept less than the unpaid balance of their mortgages when the value of the collateral has declined to the extent that foreclosure is not an attractive remedy.
sick building An office building or home that contains air pollutants causing illnesses to occupants, such as headaches, sinus problems, eye irritation and dizziness.
signing a house The placement by a licensee of a “For Sale” sign on a listed residence for the dual purposes of advertising the name of the company the licensee represents and identifying the house as available. The addition of a “Sold” sign on the premises during escrow also serves to advertise the agent's company; it certainly does not contribute to selling the house.
silent loan A conventional mortgage that does not contain a due-on-sale clause. Such a "silent" loan is fully assumable by a purchaser of the property who cannot be charged an assumption fee.
silent second A promissory note secured by a junior deed of trust and paid only when a predetermined amount of rental income is generated by the owner of the property. Pending that time, the note simply accrues interest. A silent second effectively defers payment until it is justified by the production of rental income, thereby minimizing or eliminating the owner's negative cash flow.
single-digit mortgage rate Mortgage interest at less than ten percent stated in the note. Although the contract rate in the note may be single digit, the annualized percentage rate (APR) may be double digit due to the impact of origination and other fees that are taken into consideration in the APR.
single family condo syn detached condo A separate structure with common ownership of yards, drives and other areas. See condominium.
single family residence A dwelling designed to house a family of related members.
SIR Society of Industrial Realtors An affiliate of the National Association of Realtors.
site A parcel of land to be developed, or the land underlying a structure.
skeleton lease syn short-form lease and memorandum of lease See short-form lease.
sky lease A lease that pertains to the space above the landlord's real estate.
smart house A house in which the owners control the lights, appliances, heat, cooling, and alarm systems with a computer system hooked up through the home wiring.
smart office building syn intelligent building, telecommunications enhanced real estate, (TERE), and shared tenant services, (STS) An office building that has been wired to accept state-of-the-art electronics equipment. Capabilities include computerized control of climate, security systems, life-safety systems (fire control, for example), information management systems (electronic mail, for example) , and telecommunications systems (with video transmissions to other locations). These features are generally available to tenants on an as-needed basis, and they are billed for the services they use.
smoking gun A crucial or vital piece of evidence that could affect the outcome of litigation. Some attorneys engage in discovery practices primarily in search of some smoking gun among the opponent’s files and records.
Society of Industrial Realtors, (SIR) See SIR.
soft dollars Down payment cash received by a seller but disguised as payment for a covenant-not-to-compete, or a consulting agreement, or as a property management fee. The effect of such a payment is that the seller receives cash, which is considered, for tax purposes, ordinary income instead of down payment money, which is considered a capital gain. In either case, the seller receives the same amount of cash, it is the tax consequence that differs. The buyer receives the benefit of a tax deduction for such soft dollars, but not for down payment hard dollars. Sellers carryback financing also is referred to as soft money (paper) as opposed to hard money (cash). Buy soft, sell hard!
soft market A buyer's market characterized by an absence of buyers.
soft price The asking price when the seller is prepared to accept less. A price is soft when the seller is flexible, and hard when he isn't.
soft sell A technique of letting a product sell itself, with a minimum of puffery and hard sell techniques.
spec Short for "on speculation." The term is used when a building is constructed before a buyer or tenant is obtained. For example, "He is a builder of spec homes."
specialist in real estate securities, (SRS) See SRS.
specific performance Remedy available in a court of equity for a buyer to get possession and title to real property and to goods that are unique, when the seller refuses to deliver under a valid sales contract. Dollar damages that are the customary remedy are deemed inadequate.
speculator Someone who gambles on a future sale or lease. A land speculator gambles that the value of his land will increase. A builder of spec homes gambles that buyers will like and pay a high price for homes he designed and built, within a reasonable time. A builder of spec office space gambles that leases will be obtained at a reasonable rental rate in a reasonable time.
spendable cash flow See also cash throwoff. Net operating income (NOI) less monthly PITI is the cash available to the owner “to spend”. Income tax implications are disregarded in this calculation, and sometimes is referred to as “before tax cash flow.”
spite fence A fence erected primarily to vex, annoy, or spite a neighbor. Spite fences usually block a neighbor’s view, or access, or are constructed so shabbily as to detract from the value of the victim’s property.
split commission A commission divided between real estate agents.
Ordinarily a total commission is split between listing and selling agents.
split level home A residence that has floors at different levels.
split-lot duplex A duplex on a lot divided into two lots to accommodate separate ownership of each side.
split-rate financing A financing package with different interest rates allocated to the land and to the structures. Land and structures are usually treated separately for tax purposes. Since land is not depreciable and the income it produces is not, therefore, sheltered. See also tax shelter.
split-time financing A financing method in commercial development when a short-term construction loan and long-term permanent loan are obtained at different times. That is, no permanent loan has been committed at the time the construction loan is made. The permanent loan is obtained after completion of the project. Sometimes the construction lender (who may be concerned that no reasonable permanent loan will materialize) will require a "standby commitment" whereby the developer has the option to require another lender to make a permanent loan at a floating interest rate. The developer will have to pay the standby lender a standby fee, perhaps two percent per year. As an alternative, a "purchase standby" gives a developer the option to sell to a standby purchaser. The developer may prefer a standby commitment if he believes that interest rates are in a downward trend, so that he can borrow later at a lower rate. The opposite of split-time financing occurs when a developer obtains a permanent loan commitment at the same time a construction loan is arranged.
spot zoning Rezoning of one parcel or one small area. Historically, spot zoning involves down zoning and does not occur in response to a request of a landowner. Spot zoning usually is an improper use of the zoning power.
spread syn margin The spread (or margin or differential)
is a percentage added to an index rate of interest to set the contract
rate of interest in an adjustable-rate mortgage. The margin remains
constant through the term of the loan and is one measure of profit to the
lender. Lenders set their margins by taking into consideration competitive
market conditions.
Index rate of interest + spread = contract rate of interest.
square-foot cost The result, in dollars, of dividing the total cost of the improvement by the number of square feet of floor it contains. It is a useful way to estimate and compare construction costs and market values.
SRA Senior Residential Appraiser The designation SRA is awarded by the society of Real Estate Appraisers.
SREA Senior Real Estate Analyst SREA is the highest designation awarded by the Society of Real Estate Appraisers.
SRPA Senior Real Property Appraiser The designation SRPA is awarded by the Society of Real Estate Appraiser for its members who are qualified to appraise both residential and income producing property.
SRS Specialist in Real Estate Securities The designation SRS is awarded by the Real Estate Securities and Syndication Institute (RESSI).
SR/WA Senior Right of Way Agent The designation SR/WA is awarded by the International Right of Way Association.
standard housing Housing that meets minimum standards for safety, structural soundness and sanitation.
standard title insurance “Vanilla” title insurance that does not include the special coverages included within the American Land Title Association variety of coverage.
stare decisis [Latin for “to stand by decided cases”] The common-law doctrine that binds an inferior (subordinate) court to follow and apply decisions and interpretations of higher courts when similar cases arise. Also called the doctrine of precedents.
Starker exchange syn delayed exchange See delayed exchange.
starter home The first home a person or couple purchases. Condominiums often are starter homes.
statutes of frauds A state statue requiring certain types of contracts to be evidenced by a writing and to be signed by the party to be charged, or by her or his authorized agent.
statute of limitations A statute that bars civil or criminal proceedings unless brought within a specified period of time after the act occurred. Note that there is no statute of limitations for murder.
statutory law Written laws created by some legislative body, such as a legislature (statutes), county board of supervisors (ordinances) or administrative agency (rules). State statutory law is compiled by subject matter into volumes called codes, such as the Business and Professions Code.
steering The unethical act of guiding purchasers of real estate to specific areas to promote segregation.
step-up clause A clause in a commercial lease that automatically operates to "pass-through" to the tenant annual increases in operating expenses. Usually a step-up clause will call for an increase annually to cover expected increases in operating expenses. See also net lease and graduated lease.
step-up lease A lease that requires specific rent increases at specific times during its term. Rent is automatically stepped-up, i.e., increased, at those dates.
sticker shock An unexpected and disadvantageous change in the terms of a mortgage loan commitment. Even firm commitments have time limits, and if a loan package does not close within that time limit, the final deal offered by the lender may be different than the original commitment. It is possible for a lender to sit on the loan paperwork long enough to justify a higher interest rate or other change in the loan terms. Deliberate delay may be a variety of fraud known as bait and switch, where favorable terms are dangled as bait but by the time the loan closes there is a switch to different terms. However, delay is justified during periods when loan activity is very high, jamming the lenders with paperwork. Borrowers can protect themselves partially by having a backup loan commitment.
stiffed Unpaid.
strict liability A doctrine of law providing that injuries caused
by defective products should be paid by all organizations that participate
in the manufacturing, marketing and distributing processes. The victim
is permitted to recover from any of the possible defendants. For
example, under this doctrine, a landlord has been held liable to his tenant
who fell through a defective shower door suffering serious bodily injury.
The landlord was thereafter free to sue the
manufacturer or wholesaler or retailer of the glass door for reimbursement.
The laws of strict liability differ from state to state.
strip shopping center A commercial development of retail shops characterized by one large anchor tenant with smaller shops alongside. Unlike the centralized parking for shopping malls, each strip enter store has adjoining parking spaces. They are not enclosed overhead as are malls.
STS shared tenant services See shared tenant services.
subdivision home Any home built in a tract of land that previously has been subdivided into lots. Most subdivision homes are designed and built by one builder to conform to a variety of three or four floor plans.
subject to clause syn contingency, contingency clause, escape clause, and weasel clause See contingency.
sublease syn assignment of lease An agreement between
a member of a co-op development and another person who wishes to lease
the member's unit without the transfer of ownership. Such a sublease
agreement must be approved by the co-op's board of directors, and subtenants
must personally be approved and meet the same eligibility requirements
as members.
Also, the transfer by a tenant of a portion of the physical
premises within a leasehold for all of its remaining term, or a transfer
of all of the physical premises for only a part of the unexpired leasehold
term. See also assignment of lease.
subordinate n. inferior to, as a second deed of trust v. to change from a superior to an inferior priority, as from a first to a second deed of trust.
subordination agreement A contract contained in or incorporated
by a deed of trust that reduces its priority to another existing or anticipated
deed of trust. Without subordination, a developer would have to retire
the full unpaid balance of the secured purchase-money note before construction
or development because institutional lenders of interim financing are restricted
to first priority liens.
Example: Seller takes back a purchase-money note secured
by a deed of trust for 90 percent of the purchase price. The buyer
obtains interim financing with which to manufacture twenty-five lots on
the condition that the seller subordinate. Upon close of escrow,
the seller's encumbrance is of first priority; upon recordation of
the construction loan, the seller's lien is automatically reduced to second
priority.
An increased sales price is typically the incentive for a seller
to accept a reduced priority and the risk of inadequate security.
In considering the specific enforcement of a subordination agreement, the
court will require specificity and fairness. Therefore, important
factors to be included in the agreement included specification of all terms
of the superior loan (the interest rate, points, term, amortization rate,
type lender, and use of the proceeds) and consideration of the impact on
the value of the seller's collateral at all stages until the loan is retired.
Because of the artificially increased price demanded by a subordinating
seller, the subdivider/purchaser and seller are in a quasi-joint venture
relationship.
subpar loan Loans for “D” grade borrowers who must pay exceptionally high interest rates and many points to obtain financing to purchase homes. These borrowers typically have demonstrated an unwillingness or inability to pay debt. Many have a bankruptcy history. Because of the risks involved, lenders may charge 8 to 12 points and a down payment of 35 percent. Interest may be 15 percent and is never lower than 12 percent. The motivation of borrowers who apply for such loans to refinance lower rate mortgages is to take money out of their houses to pay off credit cards which may have 19 percent or more interest rates. Lenders make money even with the high rate of defaults of such loans.
subpeona An order directing a person to appear at a certain time and place for the purpose of giving testimony as a witness.
subsurface rights Ownership of the rights lying beneath the surface of real property, such as mineral rights.
substitution of collateral clause A provision in a note that authorizes the debtor to transfer his mortgage obligation to a different, or substitute parcel of real estate at some time in the future. Following substitution, the original collateral is released and becomes free and clear property.
summons A document issued by a clerk of the court at the request of the plaintiff when a complaint is filed. After service on the defendant, judgment will be taken if the complaint is not answered within the statutory time (e.g., 15 or 30 days). A summons is prepared by the plaintiff’s attorney.
sweat equity The equity in a home created by the owner's personal work done pursuant to an agreement with the seller/builder. For example, a purchaser can negotiate for a price reduction in exchange for acceptance of a partially completed home. The home is completed after the purchase by the "sweat" of the new homeowner. Also, work done by members of a co-op or tenant association for the benefit of the membership.
sweetener An extra benefit offered during the course of negotiations to induce execution of a contract.
swing loan An interim loan used to finance the down payment for a second home pending the sale of the seller's listed home. The swing loan is repaid from the sale proceeds of the listed home. A swing loan is used as a "sweetener" in attracting new listings. Generally, it is ill advised because of the uncertainties surrounding the sale of the listed home; the inherent difficulties of owning two homes, and the opportunity for conflict between the seller and the agent who made the loan. Any short-term loan made between two transactions, necessary to swing the deal.
syndication A pooling of capital to achieve an investment goal. Syndications usually contain active participants with real estate expertise and inactive investors with little or no real estate savvy. See also limited partnership.