CAPITAL GAIN
A profit earned from the sale of an asset such as stocks, bonds, mutual funds and real estate between the time the asset was purchased and the time the asset was sold.
CAPITALIZATION An arithmetical process for ascertaining the value of a property using a proper investment rate of return and the net income expected to be produced by the property. Capitalizing the interest increases the monthly payment amount that you will eventually have to repay. It is expressed as Income/Rate = Value Rate
CAPITALIZATION RATE The rate of expected return from the net income that a property will produce on the owner's investment. It is a ratio of income to value and is expressed as a percentage.
CASH FLOW Difference between cash in (income) vs. cash out (expenses). The amount of cash earned after, after deducting all operating and fixed expenses from the gross income. It is calculated by adding: net after-tax income plus any bookkeeping expenses (amounts charged off for depreciation, depletion, amortization, and charges to reserves) that result in items being deducted but not paid out in cash. When expenses exceed income, a negative cash flow results.
CASH RENT In an agricultural lease, an arrangement in which a farm operator rents a piece of land from its owner for a set per-acre price as opposed to sharecropping.
CAVEAT EMPTOR A Latin phrase meaning "Let the buyer beware," stating that the buyer alone is responsible for assessing the quality of a purchase before buying, unless protected by warranty. This puts the burden onto the buyer to be satisfied with the property before purchasing.
CERTIFICATE OF REASONABLE VALUE (CRV) An appraisal of property for the purpose of insurance by the Veteran's Administration. Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV.
CERTIFICATE OF SALE Document issued by the court at a judicial sale, to the winning bidder at a foreclosure sale stating their privileges to the property once the borrowers redemption period has expired and that the holder paid the property taxes for that interim period.
CERTIFICATE OF TITLE A statement of opinion on the status of the title to a parcel of real property, based on an examination of specified public records. It is considered a conclusive evidence of the present ownership and state of the title to the property described therein. Before the title is transferred at closing, it should be clear and free of all liens or other claims.
CHAIN OF TITLE A chronological list of documents comprising the record history of the transfers of title to a piece of real property over the years. It starts with the earliest existing document and ends whereby the present holder of real property derives title.
CHANGE The appraisal principle that holds that no physical or economic condition remains constant.
CIVIL RIGHTS ACT OF 1866 An act that prohibits racial discrimination in the sale and rental of housing.
CLOSING STATEMENT A detailed statement made by a broker or an escrow company of cash accounting of a real estate transaction that reflects the financial position of the buyer or seller and the costs paid by each party.
CLOUD ON TITLE A claim, lien or encumbrance that may affect or impair the title to real property or make the owner’s title to property doubtful because of their apparent or probable validity. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action. In that case property can be transferred but its market value may be reduced.
CLUSTERING The grouping of homesites in a location within a subdivision on smaller lots than normal, with the remaining land used as common areas. Kind of relational grouping of buyers and suppliers.
CODE OF ETHICS A written system of standards for ethical conduct.
CODICIL A supplement or an addition to a will, executed with the same formalities as a will that normally does not modify, delete, qualify, or revoke provisions contained in it.
COINSURANCE CLAUSE A clause in insurance policies or commercial property that requires the insured to carry at least 80 percent of the total’s property's actual replacement cost. 80-20 would mean that the insurer would pay 80% and the insured would pay 20% of all losses. Also known as Average or Contribution Clause.
COMMINGLING The unauthorized and improper act by a real estate broker of mixing of money held in trust which are client customer monies with other funds which are personal or business monies. By law brokers are required to maintain a separate trust or escrow account for other parties' funds held temporarily by the broker.
COMMISSION Payment to a broker for services rendered, such as arranging the purchase or sale of a security or real estate. It is usually a percentage of the selling price of the property and vary widely from broker to broker. COMMON ELEMENTS Parts of a property that are necessary or convenient to the existence, maintenance and safety of a condominium or are normally in common use by all of the condominium residents. A common area in a condominium project is owned by the condominium corporation for the use of all unit owners.
COMMON LAW The system of laws based on custom, court decisions, on the doctrines implied in those decisions and usages.
COMMUNITY PROPERTY A form of property ownership under which property acquired by a couple during marriage is presumed to be owned jointly even if it was originally acquired in the name of only one partner. A leftover of Spanish law is found largely in western states.
COMPARABLES Properties in assessing or establishing the fair market value of a property under consideration. They are used in appraisal reports that are substantially equivalent in size, location and amenities.
COMPETITION The appraisal principle that states that excess profits generate competition.
COMPETITIVE MARKET ANALYSIS (CMA) A realistic estimate of a home’s current market value based on recent sales of comparative home with similar features. This is not an appraisal. It is an opinion of value.
CONDEMNATION A judicial or administrative proceeding of taking private property for public use through the right of eminent domain with adequate compensation to the owner.
CONDITIONAL-USE PERMIT A CONDITIONAL USE PERMIT (CUP) is a written governmental permission allowing a use inconsistent with zoning after considering special uses which may be essential or desirable to a particular community such as locating an emergency medical facility in a predominantly residential area. It also enables a municipality to control certain uses which could have disadvantageous effects on the community.
CONDOMINIUM A form of housing-tenure where the absolute ownership of a unit in a multi-unit building is divided into individual units and sold with shared ownership of the common areas and sometimes the exclusive use of certain limited common areas. Ownership is controlled by the condominium management.
CONFESSION OF JUDGEMENT CLAUSE Permits judgment to be entered against a debtor without the creditor's having to institute legal proceedings. If the debtor has a valid defense to the landlord's suit, the debtor cannot present that defense. This procedure may be unenforceable. A debtor should see an attorney if he/she receives a notice that judgement has been entered against him/her.
CONFORMITY The appraisal principle that holds that the greater the compliance among properties in an area, the better they will hold their value.
CONSIDERATION Consideration is a central concept and an essential element for the formation of a contract. It is given by both parties to a contract that induces them to enter into the agreement to exchange mutual performances.
CONSTRUCTIVE EVICTION Any disturbance by the landlord which interfere with a tenant's use and enjoyment of the rented premises to such an extent that the tenant is, at law, considered to have been improperly forced out of the premises. Here the tenant can also be forced to leave leased premises whereby they are rendered unsuitable for occupancy and are uninhabitable. In such a case, the lease is terminated and the tenant is not liable for further payment of rent.
CONSTRUCTIVE NOTICE Notice given to the world by recorded documents with a public official. It is a legal fiction used in the law of both common law and civil law systems to connote that a person or entity is legally presumed to have knowledge of such documents and their contents, even if they have no actual knowledge of it. Possession of property is also considered constructive notice that the person in possession has an interest in the property.
CONTINGENCY A contractual provision stating that of all of the terms of the contract will be altered or voided before the contract becomes legally binding. CONTRACT A legally enforceable promise or set of promises to perform or to refrain from performing some specified act. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed. For a contract to be valid, both parties must indicate that they agree to its terms. CONTRIBUTION The appraisal principle that states that the value of any component of a property is what it gives to the value of the whole or what its absence detracts from that value. It is an unconditional transfer of cash or other assets to an entity in a voluntary nonreciprocal transfer by another entity, acting other than as an owner.
CONVENTIONAL LOAN A loan that requires no insurance or guarantee.
CONVEYANCE A document that transfers title to real property from one person to another by deed. The term is also used in describing the act by which a property transfer is effected. It may also include most of the instruments by which an interest in real estate is created, mortgaged or assigned.
COOPERATIVE A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property; each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan. It is controlled and operated on a nonprofit basis, a cooperative returns any margins or profits to members on the basis of patronage.
CO-OWNERSHIP Title ownership held by two or more persons.
CORPORATION A legal entity or organization that has powers and liabilities as defined by law. Its rights of doing business are essentially the same as those of an individual. It May be private (ownership held by specific individuals and not traded on a public stock exchange) or public (shares traded on stock exchange). It can own property, incur debts, sue, and be sued. The entity has continuous existence until it is dissolved according to legal procedures. CORRECTION LINES A rectangular survey system (government survey) for surveying land that uses latitude and longitude lines as references. Correction lines used to correct for the earth's curvature. Every fourth township line (at 24-mile intervals) is used as a correction line on which the intervals between the north and south range lines are remeasured and corrected to a full six miles.
COST APPROACH Cost approach is one of the classical methods of appraisal. The process of estimating the value of a property based on current construction costs, less depreciation, plus land value. The land value is most frequently determined by the sales comparison approach.
COST RECOVERY An Internal Revenue Service term for depreciation.
COUNTEROFFER A response to an offer by one who rejects an unsatisfactory offer. It has the legal effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror. A counteroffer normally terminates the original offer.
COVENANT A solemn contract between two or more parties in which a party or parties pledge to perform or not perform specified acts with regard to property. This written agreement affects the use of land or property written into the title. It is usually found in such real estate documents as deeds, mortgages, leases and contracts for deed. For example, a covenant can impose the obligation on a borrower to make mortgage payments in certain amounts on certain dates.
COVENANT OF QUIET ENJOYMENT The covenant implied by decree by which a landlord guarantees that a tenant may take possession of leased premises and that the landlord will not interfere in the tenant's possession and enjoyment of the demised premises.
CREDIT On a closing statement, an amount entered in a person's favor--either an amount the party has paid or an amount for which the party must be reimbursed. A credit records the increases in liabilities, owners' equity, and revenues as well as the decreases in assets and expenses.
CURTEST A life estate, usually a fractional interest, given by some states to the surviving husband in real estate owned by his deceased wife. A few states still recognize this anachronism.
CAPITALIZATION An arithmetical process for ascertaining the value of a property using a proper investment rate of return and the net income expected to be produced by the property. Capitalizing the interest increases the monthly payment amount that you will eventually have to repay. It is expressed as Income/Rate = Value Rate
CAPITALIZATION RATE The rate of expected return from the net income that a property will produce on the owner's investment. It is a ratio of income to value and is expressed as a percentage.
CASH FLOW Difference between cash in (income) vs. cash out (expenses). The amount of cash earned after, after deducting all operating and fixed expenses from the gross income. It is calculated by adding: net after-tax income plus any bookkeeping expenses (amounts charged off for depreciation, depletion, amortization, and charges to reserves) that result in items being deducted but not paid out in cash. When expenses exceed income, a negative cash flow results.
CASH RENT In an agricultural lease, an arrangement in which a farm operator rents a piece of land from its owner for a set per-acre price as opposed to sharecropping.
CAVEAT EMPTOR A Latin phrase meaning "Let the buyer beware," stating that the buyer alone is responsible for assessing the quality of a purchase before buying, unless protected by warranty. This puts the burden onto the buyer to be satisfied with the property before purchasing.
CERTIFICATE OF REASONABLE VALUE (CRV) An appraisal of property for the purpose of insurance by the Veteran's Administration. Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV.
CERTIFICATE OF SALE Document issued by the court at a judicial sale, to the winning bidder at a foreclosure sale stating their privileges to the property once the borrowers redemption period has expired and that the holder paid the property taxes for that interim period.
CERTIFICATE OF TITLE A statement of opinion on the status of the title to a parcel of real property, based on an examination of specified public records. It is considered a conclusive evidence of the present ownership and state of the title to the property described therein. Before the title is transferred at closing, it should be clear and free of all liens or other claims.
CHAIN OF TITLE A chronological list of documents comprising the record history of the transfers of title to a piece of real property over the years. It starts with the earliest existing document and ends whereby the present holder of real property derives title.
CHANGE The appraisal principle that holds that no physical or economic condition remains constant.
CIVIL RIGHTS ACT OF 1866 An act that prohibits racial discrimination in the sale and rental of housing.
CLOSING STATEMENT A detailed statement made by a broker or an escrow company of cash accounting of a real estate transaction that reflects the financial position of the buyer or seller and the costs paid by each party.
CLOUD ON TITLE A claim, lien or encumbrance that may affect or impair the title to real property or make the owner’s title to property doubtful because of their apparent or probable validity. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action. In that case property can be transferred but its market value may be reduced.
CLUSTERING The grouping of homesites in a location within a subdivision on smaller lots than normal, with the remaining land used as common areas. Kind of relational grouping of buyers and suppliers.
CODE OF ETHICS A written system of standards for ethical conduct.
CODICIL A supplement or an addition to a will, executed with the same formalities as a will that normally does not modify, delete, qualify, or revoke provisions contained in it.
COINSURANCE CLAUSE A clause in insurance policies or commercial property that requires the insured to carry at least 80 percent of the total’s property's actual replacement cost. 80-20 would mean that the insurer would pay 80% and the insured would pay 20% of all losses. Also known as Average or Contribution Clause.
COMMINGLING The unauthorized and improper act by a real estate broker of mixing of money held in trust which are client customer monies with other funds which are personal or business monies. By law brokers are required to maintain a separate trust or escrow account for other parties' funds held temporarily by the broker.
COMMISSION Payment to a broker for services rendered, such as arranging the purchase or sale of a security or real estate. It is usually a percentage of the selling price of the property and vary widely from broker to broker. COMMON ELEMENTS Parts of a property that are necessary or convenient to the existence, maintenance and safety of a condominium or are normally in common use by all of the condominium residents. A common area in a condominium project is owned by the condominium corporation for the use of all unit owners.
COMMON LAW The system of laws based on custom, court decisions, on the doctrines implied in those decisions and usages.
COMMUNITY PROPERTY A form of property ownership under which property acquired by a couple during marriage is presumed to be owned jointly even if it was originally acquired in the name of only one partner. A leftover of Spanish law is found largely in western states.
COMPARABLES Properties in assessing or establishing the fair market value of a property under consideration. They are used in appraisal reports that are substantially equivalent in size, location and amenities.
COMPETITION The appraisal principle that states that excess profits generate competition.
COMPETITIVE MARKET ANALYSIS (CMA) A realistic estimate of a home’s current market value based on recent sales of comparative home with similar features. This is not an appraisal. It is an opinion of value.
CONDEMNATION A judicial or administrative proceeding of taking private property for public use through the right of eminent domain with adequate compensation to the owner.
CONDITIONAL-USE PERMIT A CONDITIONAL USE PERMIT (CUP) is a written governmental permission allowing a use inconsistent with zoning after considering special uses which may be essential or desirable to a particular community such as locating an emergency medical facility in a predominantly residential area. It also enables a municipality to control certain uses which could have disadvantageous effects on the community.
CONDOMINIUM A form of housing-tenure where the absolute ownership of a unit in a multi-unit building is divided into individual units and sold with shared ownership of the common areas and sometimes the exclusive use of certain limited common areas. Ownership is controlled by the condominium management.
CONFESSION OF JUDGEMENT CLAUSE Permits judgment to be entered against a debtor without the creditor's having to institute legal proceedings. If the debtor has a valid defense to the landlord's suit, the debtor cannot present that defense. This procedure may be unenforceable. A debtor should see an attorney if he/she receives a notice that judgement has been entered against him/her.
CONFORMITY The appraisal principle that holds that the greater the compliance among properties in an area, the better they will hold their value.
CONSIDERATION Consideration is a central concept and an essential element for the formation of a contract. It is given by both parties to a contract that induces them to enter into the agreement to exchange mutual performances.
CONSTRUCTIVE EVICTION Any disturbance by the landlord which interfere with a tenant's use and enjoyment of the rented premises to such an extent that the tenant is, at law, considered to have been improperly forced out of the premises. Here the tenant can also be forced to leave leased premises whereby they are rendered unsuitable for occupancy and are uninhabitable. In such a case, the lease is terminated and the tenant is not liable for further payment of rent.
CONSTRUCTIVE NOTICE Notice given to the world by recorded documents with a public official. It is a legal fiction used in the law of both common law and civil law systems to connote that a person or entity is legally presumed to have knowledge of such documents and their contents, even if they have no actual knowledge of it. Possession of property is also considered constructive notice that the person in possession has an interest in the property.
CONTINGENCY A contractual provision stating that of all of the terms of the contract will be altered or voided before the contract becomes legally binding. CONTRACT A legally enforceable promise or set of promises to perform or to refrain from performing some specified act. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed. For a contract to be valid, both parties must indicate that they agree to its terms. CONTRIBUTION The appraisal principle that states that the value of any component of a property is what it gives to the value of the whole or what its absence detracts from that value. It is an unconditional transfer of cash or other assets to an entity in a voluntary nonreciprocal transfer by another entity, acting other than as an owner.
CONVENTIONAL LOAN A loan that requires no insurance or guarantee.
CONVEYANCE A document that transfers title to real property from one person to another by deed. The term is also used in describing the act by which a property transfer is effected. It may also include most of the instruments by which an interest in real estate is created, mortgaged or assigned.
COOPERATIVE A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property; each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan. It is controlled and operated on a nonprofit basis, a cooperative returns any margins or profits to members on the basis of patronage.
CO-OWNERSHIP Title ownership held by two or more persons.
CORPORATION A legal entity or organization that has powers and liabilities as defined by law. Its rights of doing business are essentially the same as those of an individual. It May be private (ownership held by specific individuals and not traded on a public stock exchange) or public (shares traded on stock exchange). It can own property, incur debts, sue, and be sued. The entity has continuous existence until it is dissolved according to legal procedures. CORRECTION LINES A rectangular survey system (government survey) for surveying land that uses latitude and longitude lines as references. Correction lines used to correct for the earth's curvature. Every fourth township line (at 24-mile intervals) is used as a correction line on which the intervals between the north and south range lines are remeasured and corrected to a full six miles.
COST APPROACH Cost approach is one of the classical methods of appraisal. The process of estimating the value of a property based on current construction costs, less depreciation, plus land value. The land value is most frequently determined by the sales comparison approach.
COST RECOVERY An Internal Revenue Service term for depreciation.
COUNTEROFFER A response to an offer by one who rejects an unsatisfactory offer. It has the legal effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror. A counteroffer normally terminates the original offer.
COVENANT A solemn contract between two or more parties in which a party or parties pledge to perform or not perform specified acts with regard to property. This written agreement affects the use of land or property written into the title. It is usually found in such real estate documents as deeds, mortgages, leases and contracts for deed. For example, a covenant can impose the obligation on a borrower to make mortgage payments in certain amounts on certain dates.
COVENANT OF QUIET ENJOYMENT The covenant implied by decree by which a landlord guarantees that a tenant may take possession of leased premises and that the landlord will not interfere in the tenant's possession and enjoyment of the demised premises.
CREDIT On a closing statement, an amount entered in a person's favor--either an amount the party has paid or an amount for which the party must be reimbursed. A credit records the increases in liabilities, owners' equity, and revenues as well as the decreases in assets and expenses.
CURTEST A life estate, usually a fractional interest, given by some states to the surviving husband in real estate owned by his deceased wife. A few states still recognize this anachronism.