Real Estate Glossary

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damages:
The indemnity recoverable by a person who has sustained an injury, either in his/her person, property, or relative rights, through the act or default of another. (See liquidated damages)
datum:
A horizontal plane from which heights and depths are measured.
debenture:
A type of long-term bond or note given as evidence of debt. Unlike a mortgage note, a debenture is not secured by a specific property. Fannie Mae issues debentures to finance the acquisition of mortgages in the secondary mortgage market. If a borrower defaults on an FHA loan, the government gives interest-bearing debentures to the mortgagee after the title is transferred to FHA. (See Fannie Mae, FHA)
debit:
A charge on an accounting statement or balance sheet (appearing on the left-hand column); the opposite of a credit. Used in bookkeeping and in preparing the closing statement in a real estate transaction.
debtor:
One who owes money; a borrower, a maker of a note; a mortgagor.
debt ratio:
The relationship between a person's long term debt payments and their monthly income.
debt-to-income ratio:
A borrower's monthly long term debt payments divided by the borrower's gross monthly income and expressed as a percentage. This ratio is used by lenders to determine if a loan applicant is qualified for the amount of the loan.
decedent:
A deceased person, especially one who has died recently.
declaration of condominium:
The declaration includes: 1. A legal description of the condominium units and the common elements (including limited common elements-those that serve only one particular unit); 2. A copy of the condominium's bylaws, drafted to govern the operation of the owners' association; 3. A survey of the property; 4. An architect's drawings, illustrating both the vertical and horizontal boundaries of each unit; and 5. Any restrictive covenants controlling the rights of ownership.
declaration of restrictions:
A statement of all the covenants, conditions and restrictions (CC&Rs) that affect a parcel of land. A subdivider may note the restrictions on the map or plan when recording the subdivision plat. If the restrictions are numerous, the subdivider may also prepare a separate document called a declaration, listing all the restrictions, and then record this declaration. (See CC&Rs)
declaratory relief action:
An action to have a court determine the rights of parties before a violation of rights has occurred.
dedication:
The voluntary transfer of private property by its owner to the public for some public use, such as for streets or schools. deed A written instrument that, when executed and delivered, conveys title to or an interest in real estate.
declining-balance method:
An accounting method of depreciation for income-tax purposes designed to provide larger-than-straight-line deductions in the early years of a property's life, and applicable to property placed in service before 1981.
The declining-balance method of calculation is applied in the IRS percentage tables for determining ACRS depreciation deductions applicable to personal property. The 3-, 5-, 7- and 10-year classes use the 200 percent declining-balance method, switching to straight-line at the appropriate time, and the 15- and 20-year classes use the 150 percent declining-balance method, also switching to straight-line. (See depreciation, straight-line method)
deed:
A written instrument, when executed and delivered, conveys title to or an interest in real estate. (See title)
deed executed pursuant to court order:
Executors' and administrator' deeds, masters' deeds, sheriffs' deeds and many other types are all deeds executed pursuant to a court order. These deeds are established by state.
deed in lieu of foreclosure:
Voluntarily signing over to a lender the property pledged as collateral on a defaulted loan. It is an alternative to a foreclosure action. Its main disadvantage to a lender is that the deed does not wipe out junior liens, as a foreclosure action would. (See junior liens)
deed in trust:
An instrument that grants a trustee under a land trust full power to sell, mortgage and subdivide a parcel of real estate. The beneficiary controls the trustee's use of these powers under the provisions of the trust agreement.
Deed of Trust and Assignment of Rents:
The first page of a lending instrument; identifies the parties to the agreement, conveys title to the trustee, describes the collateral, states the terms and conditions of the note, and refers to previously recorded "fictitious deeds of trust."
deed of reconveyance:
A document used to transfer legal title from the trustee back to the borrower (trustor) after a debt secured by a deed of trust has been paid to the lender (beneficiary). (See trust deed (deed of trust))
deed restrictions:
Provisions placed in deeds to control future uses of the property. (See covenants, conditions & restrictions, restrictive covenants)
default:
The nonperformance of a duty or obligation that is part of a contract. The most common occurrence of default on the part of a buyer or lessee is nonpayment of money when due. A default is normally a breach of contract, and the nondefaulting party can seek legal remedies to recover any loss. Defaults in long-term leases or contracts for deed other than nonpayment might be failure to pay real estate taxes, damage to the property and so forth.
defeasance clause:
A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as cancellation of a mortgage upon repayment of the mortgage loan.
defeasible fee estate:
An estate in which the holder has a fee simple title that may be divested upon the occurrence or nonoccurrence of a specified event. There are two categories of defeasible fee estates: fee simple on condition precedent (fee simple determinable) and fee simple on condition subsequent.
defect:
A condition that materially affects the value or use of residential property in an adverse manner.
defect of record:
Any encumbrance on a title that is made a part of the public record. Recorded defects include judgments, deeds of trust, mortgages, other liens and easements. (See encumbrance)
deferred capital gain:
The part of the realized gain that is tax deferred. (See capital gains, excluded capital gain, realized capital gain (loss), recognized capital gain)
deferred maintenance:
Physical deterioration of a building resulting from postponed maintenance.
deficiency judgment:
A personal judgment levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full.
delayed exchange:
A three way exchange in which the properties close at different times.
delinquent:
The status of a financial obligation, such as a mortgage loan, when it is past-due.
demand:
The amount of goods people are willing and able to buy at a given price; often coupled with supply. (See supply)
density zoning:
Zoning ordinances that restrict the maximum average number of houses per acre that may be built within a particular area, generally a subdivision. (See zoning)
deposit:
Money offered by a prospective buyer as an indication of good faith in entering into a contract to purchase; earnest money; security for the buyer's performance of a contract. An earnest money deposit is not necessary to create a valid purchase contract because the mutual promises of the parties to buy and to sell are sufficient consideration to enforce the contract. If the buyer completes the purchase, the deposit money is applied toward the purchase price.
depreciation:
The decrease in the value of an asset allowed when computing property value for tax purposes. It can also be a loss in the appraised value of a property due to physical deterioration. This latter type of depreciation is curable when it can be remedied by repair or an addition to the property, and incurable when there is no easy or ecomomic remedy. (See appreciation)
depreciable basis:
In investment real estate only structures can be depreciated. The depreciable basis is the original basis less the value of the land. (See basis)
descent:
Acquisition of an estate by inheritance in which an heir succeeds to the property by operation of law.
designated agent:
A licensee authorized by a broker to act as the agent for a specific principal in a particular transaction. A designated agent is the only agent in the company who has a fiduciary responsibility toward the principal.
destruction of premises:
In many states, once the sales contract is signed by both parties, the buyer bears the risk of any damage to the property that may occur before closing. Of course, the contract may provide otherwise.
detached garage:
A garage that is not attached to a home. Usually found in older homes.
deviation:
The measure of how widely the individual varies from the general population.
devisible contract:
A contract that consists of separate agreements that are not dependent on each other. The illegality of one part will not void the balance of the contract.
devise:
A transfer of real property under a will. The donor is the devisor, and the recipient is the devisee.
direct management costs:
Expenses that can be attributed to the operation of a management firm or department. (See indirect management costs)
direct endorsement:
The ability of an FHA-approved lender to secure FHA single- and multifamily mortgage insurance by following FHA guidelines. Under a direct endorsement program, applications for many of FHA's mortgage insurance programs can be underwritten by approved lenders who certify that the mortgage complies with applicable FHA requirements. (See mortgage insurance)
disability:
A physical or mental impairment that substantially limits one or more major life activities, such as walking, seeing, learning and working. Disability includes a record of such impairment or the fact of being regarded as having such impairment. The Americans with Disabilities Act (ADA) protects individuals with disabilities from various forms of discrimination in employment, public services, transportation, public accommodations and telecommunication services. A person abusing illegal drugs or alcohol is not covered, but a person who is rehabilitated in these areas may be protected under ADA. (See handicap)
discharge:
The release of any waste into the environment from a point source. Usually refers to the release of a liquid waste into a body of water through an outlet such as a pipe, but also refers to air emissions.
discharge of contract:
A contract is discharged when the agreement is terminated. Obviously, the most desirable case is when a contract terminates because it has been completely performed, with all its terms carried out. However, a contract may be terminated for other reasons, such as a party's breach or default.
disclaimer:
A statement denying legal responsibility, frequently found in the form of the statement, "There are no promises, representations, oral understandings or agreements except as contained herein." Such a statement, however, would not relieve the maker of any liabilities for fraudulent acts or misrepresentations. (See hold-harmless clause)
disclosed dual agency:
Real estate licensing laws may permit dual agency only if the buyer and seller are informed and consent to the broker's representation of both in the same transaction. Although the possibility of conflict of interest still exists, disclosure is intended to minimize the risk for the broker by ensuring that both principals are aware of the effect of dual agency on their respective interests. The disclosure alerts the principals that they may have to assume greater responsibility for protecting their interests than they would if they had independent representation. The broker must reconcile how, as agent, he or she will discharge the fiduciary duties on behalf of both principals, particularly providing loyalty and protecting confidential information.
disclosure:
It is the agent's duty to keep the principal informed of all facts or information that could affect a transaction. Duty of disclosure includes relevant information or material facts that the agent knows or should have known.
discount:
To sell at a reduced value; the difference between face value and cash value.
discounted cash flow:
Used in measuring the return from a real estate investment, the present value of a future income stream as determined by a given discount rate. (See present worth, return on investment)
discounting:
To sell at a reduced value; the difference between face value and cash value. Some companies specialize in buying mortgages and real estate contracts (often referred to as paper) at a discount. Often the original lender, wanting to cash out on the loan, will thus sell the mortgage at the current published mortgage discount rate. If the discount rate is 12 percent, for example, the lender could sell a $100,000 mortgage at 88 percent of its worth ($88,000 or 12 percent below par).
discount rate:
1. An annual competitive rate of return on total invested capital necessary to compensate the investor for the risks inherent in a particular investment. 2. The rate at which the Federal Reserve lends money to its eligible banks. These are short-term loans to fulfill immediate cash needs, not supplement the bank's capital. Thus, the discount rate is not a cost of funds indicator but more of a signal to the banking community. (See Federal Reserve System)
discount points:
An added loan fee charged by a lender to make the yield on a lower-than-market-interest VA or FHA loan competitive with higher-interest conventional loans. One discount point is equal to 1 percent of the loan amount.
discretionary income:
Income left over for investment after allocations for bills and savings.
disintermediation:
The process of individuals investing their funds directly instead of placing their savings with banks, savings and loan associations and similar institutions for investment by such institutions. This bypassing of financial institutions occurs when proportionately higher yields are available on secure investments (such as high-grade corporate bonds, money market funds and government securities) than can be obtained on savings deposits.
display ads:
Newspaper and magazine advertisements sold by the column inch. More elaborate than classified ads, display ads often include more extensive text, graphics and photographs. (See classified ads)
disposal:
The discharge, deposit, injection, dumping, spilling, leaking, or placing of any solid waste or hazardous waste into the environment (land, surface water, ground water, and air).
divided agency:
Acting for more than one party in a transaction without the knowledge and consent of all parties thereto. This situation is considered unlawful and may be grounds for revocation or suspension of license under Section 10176(d) of the Business and Professions Code. (See dual agency)
doctrine of prior appropriation:
In states where water is scarce, ownership and use of water are often determined by the doctrine of prior appropriation. Under this doctrine, the right to use any water; with the exception of limited domestic use, is controlled by the state rather than by the landowner adjacent to the water.
documentary transfer tax:
Tax applicable to property transfers and affixed to the grant deed; varies from county to county, city to city.
domicile:
From domus, Latin for "house." The state where an individual has his or her true, fixed permanent home and principal business establishment and where that person has the intention of returning whenever he or she is absent from it. Once established a domicile is never lost until there is a concurrence of specific intent to abandon the old domicile, intent to acquire a specific new domicile and actual physical presence in the new domicile.
Though a person may have residences in different states and reside there at different times of the year, it is possible to have only one domicile. Because domicile consists of physical presence plus an intention to make the state one's permanent abode, such factors as local registration of autos, driver's license, voting, paying taxes, membership in local organizations, local bank accounts and local business interest are all important in establishing the requisite intent.
dominant tenement:
The estate that is said to attach to and derive benefit from the servient estate in reference to an easement appurtenant. For example, an easement road passes over an owner's land (the servient tenement) to give access to an adjacent parcel (the dominant tenement). The dominant tenement usually adjoins the servient tenement. (See easement, servient tenement)
double taxation:
One of the main disadvantages of corporate ownership of income property is that the profits are subject to double taxation. As a legal entity, a corporation must file an income tax return and pay tax on its profits. The portion of the remaining profits distributed to shareholders as dividends is taxed again as part of the shareholders' individual incomes.
dower:
The legal right or interest, recognized in some states, that a wife acquires in the property her husband held or acquired during their marriage. During the husband's lifetime the right is only a possibility of an interest; upon his death it can become an interest in land.
down drain:
A drain pipe or similar conduit to allow water to flow from the rain gutter at the edge of the roof to the ground.
downzoning:
A change in zoning from a higher to a lower classification or from a more active to less active classification, such as from residential to conservation, or multifamily to single-family use. In these cases, there is no taking under eminent domain and thus no compensation paid to the affected landowner who helplessly sees the property reduce in value. (See zoning)
draws:
1. An advancement of money against future earnings. 2. Periodic advances of funds under a construction loan agreement.
drywall:
A construction material used as a basis for interior walls in a home. Drywall is composed of an inner core of chalk with a paper facing on each side.
dual agency:
An agency relationship in which the agent acts concurrently for both principals in a real estate transaction. (See agency, agent, fiduciary)
due-on-sale-clause:
A form of acceleration clause found in some mortgages, especially savings and loan mortgages, requiring the mortgagor to pay off the mortgage debt when the property is sold, resulting in automatic maturity of the note as the lender's option. This clause effectively eliminates the possibility of the new buyer's assuming the mortgage unless the mortgagee permits the assumption, in which case the mortgagee might increase the interest rate or charge as assumption fee.
dump:
A land site where wastes are discarded in a disorderly or haphazard fashion without regard to protecting the environment. Uncontrolled dumping is an indiscriminate and illegal form of waste disposal. Problems associated with dumps include multiplication of disease-carrying organisms and pests, fires, air and water pollution, unsightliness, loss of habitat, and personal injury.
duplex:
A structure that provides housing accommodations for two families and supplies each with separate entrances, kitchens, bedrooms, living rooms and bathrooms. A two-family dwelling with the units either side by side or one above the other.
duress:
Unlawful constraint or action exercised upon a person whereby the person is forced to perform an act against his or her will. A contract entered into under duress is voidable.
dwelling:
Any building, structure or part thereof used and occupied for human habitation or intended to be so used, including any appurtenances. Many municipalities have adopted ordinances relating to the repair, closing and demolition of dwellings unfit for human habitation
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