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Real Estate Terms

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CThere are 124 entries in the glossary.Pages: 1 2 » Cadastral mapA map with legal boundaries and ownership of real property used for title recording. Call OptionA provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason. CapA provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease. See lifetime payment cap, lifetime rate cap, periodic payment cap, and periodic rate cap. CapacityLenders will want to know if you can repay the mortgage debt you incur -- this is known as your capacity. Lenders will base their evaluation on employment information, how long you've worked, and how much you are paid. Lenders will also review your expenses and any other debt obligations you have. This means they'll want to know how many dependents you have and whether you pay any alimony or child support, for example. Cape codA Colonial-style house, usually 1-story in height. The house is small with a single centered front entrance. The entrance usually has one or windows on each side of the front door and is symmetrical. The chimney is often in center of the house, and the roof is a steep gable made of shingles. Capital(1) Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth of a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities. Capital assetAs defined by the IRS, an asset that can receive favorable treatment upon sale. Assets excluded would be inventory, property held for resale property used in a trade or business. Capital ExpenditureThe cost of an improvement made to extend the useful life of a property or to add to its value. Capital gainThe taxable profit from the sale of a capital asset. The gain is the difference from the basis for the capital asset and the value received less adjustments the cost of the sale, e.g., sales commissions, discount points, and closing costs. Capital gains taxA tax owed for selling something at a price that is more than the price the owner bought it for. Capital ImprovementAny structure or component erected as a permanent improvement to real property that adds to its value and useful life. Capital lossWhat a homeowner has if he sells his home for less money than he paid for it. CapitalizationProcess of estimating value by discounting stabilized net operating income by an appropriate rate. Capitalization rateCommonly called the cap rate, the capitalization rate can be used as a division factor to decide the capital value. The net income from an investment divided by the cap rate will equal the capital value, or value. The cap rate is a combination of a return or recapture of the investment and a return on the investment. Carryback financingWhen the seller helps to finances the sale of property. Cash basisThe method of reporting income and expenditures as they are received. A way of deciding the net profit or loss of a business based solely on income received minus expenses paid. Cash flowIncome from an investment after deducting expenses and debt service from gross income and before depreciation and income taxes. Net income minus debt service equals cash flow. Cash flow modelThe framework used to determine the cash flow from operations and the cash proceeds from sale. Cash reserveA requirement of some lenders that buyers have sufficient cash remaining after closing to make the first two monthly mortgage payments. Cash-on-cash returnRate of return based on cash returned to the investor on his or her cash investment. The cash-on-cash return is the relationship of the cash returned to the cash invested. Cash-out RefinanceA refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose. CD-Indexed (Certificate of Deposit) ARMsThe Certificate of Deposit index represents the weekly average of secondary market interest rates on six-month negotiable CDs. The initial interest rate and payments adjust every six months after an initial six-month period. ARMs with this index typically come with a per-adjustment cap of 1 percent and a lifetime rate cap of 6 percent. Certificate of DepositA document written by a bank or other financial institution that is evidence of a deposit, with the issuer's promise to return the deposit plus earnings at a specified interest rate within a specified time period. (see also "Adjustable-Rate Mortgage") Certificate of Deposit IndexAn index that is used to determine interest rate changes for certain ARM plans. It represents the weekly average of secondary market interest rates on six-month negotiable certificates of deposit (see also "Adjustable-Rate Mortgage") Certificate of EligibilityA document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage. Certificate of occupancyOfficial document issued by a local government body stating that a structure meets local zoning and building codes and is ready for use. Certificate Of Occupancy (CO)An official document by a governing authority stating that a structure complies with the building code and may be occupied legally. Certificate of Reasonable ValueA document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage. Certificate of TitleA statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner. Cession deedA deed used to transfer rights to a government authority. Developers may use a Cession Deed to transfer control of streets in a subdivision. Chain of TitleThe history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent. Change FrequencyThe frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM). Change OrdersAfter construction begins, you may discover that you need to make unplanned and necessary changes to the work. The contingency reserve covers unforeseen repairs or deficiencies found during renovation. Unnecessary additions or changes are treated differently. These change orders are considered discretionary and must first be approved by your lender. You must deposit additional funds to pay for the work in the escrow account before work on the changes begins. These change orders -- as well as any that result from unforeseen repairs -- must be added as amendments to your construction contract. ChattelAnother name for personal property. Chattel mortgageA lien on personal property that is not permanently attached; something other than real estate. Clear TitleA title that is free of liens or legal questions as to ownership of the property. ClosingA meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement."(see also "Settlement") Closing AgentAs a potential home buyer, you will need a closing (or "settlement") agent to coordinate the various closing activities. These can include but are not limited to preparing and recording the closing documents and disbursing funds. The types of services provided by a closing agent depend on the person you hire, but typically the closing is conducted by title companies, escrow companies or attorneys. It is usually held at the lender's or real estate sales professional's office. Closing Cost ItemA fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 statement. Closing CostsExpenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country; lenders or realtors often provide estimates of closing costs to prospective homebuyers. Closing DateAfter your lender has approved your mortgage and you accept the commitment letter, the next step is to set a closing date. Many times, your real estate sales professional coordinates the setting of this date with you, the seller, the closing agent, and your lender. You may be able to move up the time frame for your closing by working with a lender who uses Desktop Underwriter -- our advanced automated underwriting system -- because it can cut the time it takes to process your mortgage. Remember, you need to ensure that the closing occurs before your lender's commitment letter -- and the rate lock-in, if there is one -- expire. You can now finalize your moving plans. Closing dayThe day on which the formalities of a real estate sale are concluded and at which time title passes from seller to buyer. The final closing merely confirms the original agreement reached in the agreement of sale. Closing Statement(see also "HUD-1 Settlement Statement") Cloud on TitleAny conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action. Co-makerA person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. (see also "Endorser") Co-signerA person who signs loan documents, such as a mortgage note with another person. The co-signer is responsible for making payments, if the borrower does not. CodesStandards for constructing buildings that are established by city, state or municipal governments. In most areas these codes are modeled after national codes establish many minimum requirements for construction buildings. Points covered by the codes are design, quality of construction, use and occupancy of the building on the site, safety and health. CoinsuranceA sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss. Coinsurance ClauseA provision in a hazard insurance policy that states the amount of coverage that must be maintained -- as a percentage of the total value of the property -- for the insured to collect the full amount of a loss. Collateral or securityProperty that backs up a loan. If the borrower does not pay back the loan as agreed, the lender can take the collateral. A house is collateral for a mortgage loan. A house gives security to a mortgage loan. CollectionThe efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary. Collection agenciesPrivate businesses, hired by creditors, that try to get borrowers to make payments that are overdue. CollusionTwo or more parties agree to perform an illegal act. Commercial BanksCommercial banks, like thrifts, originate and service mortgage loans. In some cases, commercial banks may have mortgage banking subsidiaries that perform this function. Banks may choose to hold a loan in their own portfolio or sell the loan to an investor. CommissionThe fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan. Commitment LetterA formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment."(see also "Loan Committment") Common Area AssessmentsLevies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project. Common Area MaintenanceCharges paid by the tenant for the upkeep of areas designated for the use (CAM) and benefit of all tenants. Common AreasThose portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc. Common LawAn unwritten body of law based on general custom in England and used to an extent in the United States. Community Development Block Grant PrograProvides eligible metropolitan cities, urban counties (called "entitlement communities"), and state governments for rural areas with annual direct grants that they can use to revitalize neigh borhoods, expand affordable housing and economic opportunities, and/or improve community facilities and services, principally to benefit low- and moderate-income persons. Community home buyer's programAn alternative financing option that allows households of modest means to qualify for mortgages using nontraditional credit histories, 33 percent housing-to-income and 38 percent debt to-income ratios, and the waiver of the usual two payment cash reserve at closing. Community home improvement mortgage loanAn alternative financing option that allows low- and moderate-income home buyers to obtain 95 percent financing for the purchase and improvement of a home in need of modest repairs. Community land trust mortgage loanAn alternative financing option that enables low- and moderate-income home buyers to purchase housing that has been improved by a nonprofit Community Land Trust, and to lease the land on which the property stands. Community Land Trust Mortgage OptionAn alternative financing option that enables low- and moderate-income home buyers to purchase housing that has been improved by a nonprofit Community Land Trust and to lease the land on which the property stands. Community PropertyIn some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse. ComparablesAn abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property. Completion bondsBonds provided by contractors to lenders to guarantee completion of construction in accordance plans and specifications. Compoinent depreciationAn accounting method used to depreciate components or individual parts of a structure or improvement. Compound InterestInterest paid on the original principal balance and on the accrued and unpaid interest. Comprehensive Homeless Assistance Plan (Plans, required by law, which are submitted by states and local governments to the Secretary for approval before HUD assistance for the homeless can be made available. Comprehensive Improvement Assistance ProProgram to provide funds to Public Housing Agencies to modernize public housing units. CondemnationThe determination that a building is not fit for use or is dangerous and must be destroyed; the taking of private property for a public purpose through an exercise of the right of eminent domain. Condition of the HomePotential homeowners should know of major problems in a home before they make an offer. As a potential buyer, you should carefully examine all elements of the home. Ask questions to the seller and the real estate sales professional about any concerns you may have. Both the seller and the real estate agent can be held liable if they do not disclose any defects they know about in the home. CondominiumA real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas. Condominium ConversionChanging the ownership of an existing building (usually a rental project) to the condominium form of ownership. Condominium HotelA condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned. Construction ContractThe terms and conditions of any major renovation job should be part of a formal, legally binding contract between you and your contractor -- this is called the construction contract. The lender you choose will likely want to review this contract before you sign it. Construction LoanA short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses. Consumer credit counseling servicesNonprofit local agencies that provide credit counseling services to people for free or a small fee. Consumer credit counselorA counselor who helps people develop and stick to a plan for getting out of debt. ContiguousProperties that touch each other. Contingencies for RepairsIn your purchase offer, you may consider stating that the seller must make sure the electrical systems, heating and cooling, plumbing, and mechanical systems are functioning properly at the closing. You may also state that your purchase is contingent upon the satisfactory completion of a professional home inspection, which will check these systems and other elements more completely. These are both ways to ensure that surprises don't arise when your moving day arrives. If you do not include this clause in your contract, you are essentially accepting the house "as is." ContingencyA condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector. Contingency for Clear TitleYour purchase contract should include a contingency that the purchase is subject to your receiving clear title to the property. This process includes a title search and title insurance. Contingency for FinancingWhen you make a formal offer on a house, your contract should include a financing contingency. It specifies if you don't get the money you need to purchase the house at the terms you want, the offer is void and you will be refunded your deposit. Contingency for Personal PropertyYour purchase contract should specify appliances, fixtures, and other personal property that must remain in the home. You can avoid any surprises by listing in your contract everything that is to be left behind when the seller moves out. Contingency ReserveMost mortgages for purchase-renovation require an additional 10 percent of the total cost of the project to be put aside into a reserve account. This contingency reserve is only used when unforeseen repairs or deficiencies are found during renovation. Continuum of CareA program to help homeless Americans get housing, job training, child care, and other services. ContractAn oral or written agreement to do or not to do a certain thing. Contract AuthorityOne of the basic forms of Budget Authority. Statutory authority under which contracts or other Obligations may be entered into prior to an appropriation for the payment of such obligations. The later enacted Appropriation provides cash to liquidate such obligations. (JFMIP Core; A-34, Part 11, Section 21.1 (Budget Authority), p. 11-3) HUDCAPS Core Financial System Standard Accounting Interface, dated 9/30/97 ContractorA general contractor is a person who oversees a construction project and handles aspects such as scheduling workers and ordering supplies. Conventional MortgageA mortgage that is not insured or guaranteed by the federal government. Contrast with government mortgage. Conversion clauseA provision in some ARMs that allows you to change the ARM to a fixed-rate loan at some point during the term. Usually conversion is allowed at the end of the first adjustment period. At the time of the conversion, the new fixed rate is generally set at one of the rates then prevailing for fixed rate mortgages. The conversion feature may be available at extra cost. Conversion provisionA feature of an adjustable-rate mortgage loan that allows the borrow-er to change to a fixed-rate loan, with an interest rate and monthly payment that stay the same. Convertibility ClauseA provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination. Convertible ARMAn adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions. CooperativeA type of multiple ownership in which the residents of a multi-unit housing complex own shares in the corporation that owns the property, giving each resident the right to occupy a specific apartment or unit. Cooperative (co-op)A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit. Cooperative CorporationA business trust entity that holds title to a cooperative project and grants occupancy rights to particular apartments or units to shareholders through proprietary leases or similar arrangements. 

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